Tourism Expansion, Economic Growth, and Sectoral Composition: Does Tourism Specialization Matter?

This study examines whether the association between tourism expansion and economic growth varies with the degree of tourism specialization and whether tourism expansion is associated with changes in the sectoral composition of the economy. Using annual data for 29 tourism-specialized economies over 2000–2018, the analysis distinguishes between moderate and high tourism specialization based on the average share of international tourism receipts in GDP. Tourism expansion is measured by the annual growth rate of international tourist arrivals. The empirical strategy applies the Augmented Mean Group (AMG) estimator and uses the Common Correlated Effects Mean Group (CCEMG) estimator as a robustness check, allowing for cross-sectional dependence and slope heterogeneity. The AMG results indicate a positive association between tourism expansion and economic growth, with a larger estimated tourism coefficient in highly tourism-specialized economies. A similar pattern emerges under CCEMG, although the statistical evidence is weaker. The manufacturing results provide more limited evidence of changes in sectoral composition: AMG estimates indicate a negative association between tourism expansion and manufacturing share in highly specialized economies, but this result is not confirmed by CCEMG. The study addresses a gap in the tourism–growth literature by distinguishing tourism expansion from tourism specialization and examining whether the tourism–growth association differs across specialization levels while also considering changes in manufacturing share. The findings suggest that the tourism–growth relationship may vary with tourism specialization, while evidence of tourism-related changes in sectoral composition remains sensitive to the estimator used.