How elastic are sea, sand and sun? Dynamic panel estimates of the demand for tourism

Abstract

This paper employs recent advances in dynamic panel data analysis to study the determinants of tourist flows to the Caribbean. Consistent with the theoretical literature, the results are found to be highly sensitive to estimation technique. The preferred GMM system suggests income and price elasticities substantially above those found in the literature.

Notes

This disaggregated approach helps compensate for the lack of reliable data on duration of stay. The sketchy available data suggests that the duration of individual nationalities is reasonably constant over time implying that percentage change in entrants is a reasonable proxy for change in tourist demand for services. However, US tourists show substantially shorter spells than Europeans. Aggregate estimations may therefore conceal compositional changes and hence true changes in tourist demand.