Tourism and Economic Growth in Developed Countries in Europe: a Panel Data Approach

Abstract Inbound tourism expenditure creates direct, indirect, and induced economic effects on the national economy. It generates national income in tourism as well as in the whole economy. Inbound tourism expenditure represents an “invisible export” for destinations that can contribute to the increase of national income. The economic impact of tourism has a growing importance for many developing and, especially, emerging destinations. They are associated with tourism and investment expenditure that represents the injection of capital into a destination. The expenditure of foreign tourists has three types of impact – direct, indirect, and induced because tourism generates employment and national income in tourism as well as in the whole economy. This paper analyzes the causality between the inbound tourism expenditure and economic growth in developed countries in the European Union. The results indicate that bidirectional causality between inbound tourism expenditure and economic growth exists in France, and the tourism-led growth hypothesis is supported in Denmark, Ireland, Italy, Luxembourg, Malta, Portugal, Spain, and Sweden, while economic growth has a significant impact on inbound tourism expenditure in Cyprus and Germany. This paper contributes to understanding the reasons for such effects in a specific country. Despite the common choice of techniques in the highlighted time interval as a research methodology, the conducted research introduces complexity in the results. This work provides a foundation for further research and the development of more precise and efficient approaches to analyzing the gross domestic product generated from tourism.