Are Australia's tourism markets converging?

Abstract

In this paper we make an important contribution towards understanding Australia's tourism industry by examining whether or not Australia's tourism markets are converging. We define convergence as the reduction in tourist arrivals’ differential, which is calculated as the difference between total visitor arrivals to a country and visitor arrivals from a particular tourist source market. We analyze Australia's thirteen major tourist source markets using monthly data over the period January 1991 to September 2003. To test for convergence, we use the univariate and panel Lagrange multiplier (LM) tests. Our main finding is that when we allow for two structural breaks in the data series, both univariate and panel LM tests provide strong evidence for convergence of Australia's tourism markets. This implies that policies aimed at attracting visitor arrivals from any one of Australia's thirteen tourist source markets will boost the volume of tourists coming into the country.

Acknowledgements

Helpful comments and suggestions on earlier versions of this paper from an anonymous referee, Mita Bhattacharya, Christine Lim, Russell Smyth and George Tawadros are appreciated. I thank Junsoo Lee for making available the GAUSS codes used in this paper. I also acknowledge financial support from a Griffith Business School research grant: D BS1009NARAY.

Notes

¹ See also Narayan and Prasad (2003) and Narayan (2004a, 2000b).

² For an application of this technique in a macroeconomic context, see Narayan (2004c) and Narayan and Smyth (2005).