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ABSTRACT
An overwhelming amount of studies has investigated tourism as a driver of growth and there is a wide consensus on a positive relationship (tourism-led growth hypothesis). However, recent studies have also pointed out that the tourism-growth nexus may be conditional on certain elements like development level and infrastructure, education and human capital among others. Another factor which is believed to moderate the tourism-growth link is the level of digitalisation of the destination country and this research claims that countries with higher levels of digitalisation could benefit from increased tourism economic benefits. This study analyses the moderating role of such digitalisation in the tourism-growth link. The research uses annual panel data of 28 small island economies from 1990 to 2019 and applies panel autoregressive distributed lag (PARDL) methodology to analyse the long-run and short-run relationship among the variables. Results confirm the Tourism-led growth hypothesis in both the long run and short run, but more importantly point out that this relationship is moderated or is conditional by the level of digitalisation. In fact, the economic benefit of tourism is found to be higher with increased digitalisation level. Panel Granger Causality tests confirm the causal effect of digitalisation on tourism development as well as a bi-directional causality between tourism development and economic growth. The implications are clear that government and tourism businesses should accelerate the digitalisation process and concentrate on the concept of e-tourism to maximise its return.
Disclosure statement
No potential conflict of interest was reported by the author(s).
Notes
1 Web 2.0 is the wildly read write web which focus on communities (blogs, sharing contents, Wikipedia, tagging etc.) Web 3.0 is the portable personal web which focus on the individual lifestream (semantic web, widgets, drag and drop mashups, etc.)
2 Small Island Developing States (SIDS) are a group of developing countries that are small island countries which tend to share similar sustainable development challenges. These include small but growing populations, limited resources, remoteness, susceptibility to natural disasters, vulnerability to external shocks, excessive dependence on international trade, and fragile environments. Their growth and development is also held back by high communication, energy and transportation costs, irregular international transport volumes, disproportionately expensive public administration and infrastructure due to their small size, and little to no opportunity to create economies of scale. We have included the list of SIDS.
3 Traditional market and profile surveys of tourists and their statistical processing are usually expensive.
4 ICT is an essential element in the WTTC competitiveness indicator.
5 Small island economies included in the present study are categorised as SIDS. The 28 islands included are: Aruba, Antigua and Barbuda, Barbados, Bahrain, Bahamas, Belize, Comoros, Cape Verde, Cuba, Dominica, Fiji, Grenada, Haiti, Kiribati, Trinidad and Tobago, Tuvalu, Vanuatu, Tonga, Solomon Islands, Jamaica, Palau, Papua New Guinea, Maldives, Mauritius, Marshall, Guyana, St Vincent, Samoa
6 Based on data availability.
7 We used Bartlette, Levine and Brown-Forsythe to test whether there were equal variances between the variables. The results shows that there is a significant difference between the variances of the variables. Hence, null hypothesis of no difference in variances is rejected. (see appendix).
10 PMG is efficient estimation than MG under null hypothesis.
11 PMG is efficient estimation than DFE under null hypothesis.