Is there growth impact of tourism? Evidence from selected small island states

Abstract

This study investigates the growth impact of international tourist arrivals on carbon emissions in selected small island states via Environmental Kuznets Curve (EKC) hypothesis. The study employed a panel-based multivariate model for seven small islands between the periods of 1995 and 2013 to evaluate the long-run equilibrium relationships between international tourism and carbon emissions through the channels of energy consumption and economic growth. Findings from the panel cointegration results show the existence of a long-run equilibrium relationship between the variables of interest. International tourist arrivals have a negatively significant impact on carbon dioxide emissions in the long run. Thus, we infer that the law of diminishing marginal returns with regard to tourism-induced EKC hypothesis holds in the case of small island states.

Keywords:

• international tourism
• carbon emissions
• energy consumption
• economic growth
• small island states

JEL Codes:

• Q54
• P18
• Z3

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

1 It is an assumption which has been confirmed empirically for different countries, though not generalized, that tourism can stimulate or lead to long-run economic growth (see Gunduz & Hatemi-J, 2005; Katircioglu, 2009a; Lean & Tang, 2010)

2 We referred this situation as the growth impact of tourism. The idea behind this is that when tourist inflow is much more than the usual, this can be termed as its growth in terms of tourism.

3 Some of the major determinants of carbon emissions with regard to tourism is the distance between the tourist’s residence and destinations, the mode of transport choice (which facilitates burning of fossil-fuel) coupled with their length of stay among others. Therefore, the study hypothesized based on the findings of studies (see Gössling, et al., 2005) that, at a minimal level, the inflow of tourists may not have a positive effect on CO₂, in terms of creating more emissions in the host country. However, when tourist inflow becomes explosive (i.e. the growth impact), more energy will be burnt (fossil-fuel and other emission-related gases), length of stay becomes longer and this may positively enhance the CO₂ level and decrease the impact on growth.

4 For variables’ measurements, refer to Section 3.

5 For interested reader, see Johansen (1991), MacKinnon (1996), MacKinnon et al. (1999), Breitung (2005), and Dritsakis (2004a).

6 However, there have been some arguments about using Hausman (1978) test in a choice of model between random effects and fixed effects. The choice of model should be based on the author’s intuition regarding the properties of the data.