The Journal of International Trade & Economic Development: An International and Comparative Review

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Trade & Economic Development:
An International and
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Trade in tourism services:

Explaining tourism trade and the
impact of the general agreement
on trade in services on the gains
from trade
a b
Camilla Jensen & Jie Zhang
a
School of Economics, Faculty of Arts and Social
Sciences, University of Nottingham , Jalan Broga ,
Semenyih , 43500 , Malaysia
b
Bornholm Centre for Tourism Research , Denmark
Published online: 20 Feb 2012.
To cite this article: Camilla Jensen & Jie Zhang (2013) Trade in tourism services:
Explaining tourism trade and the impact of the general agreement on trade in
services on the gains from trade, The Journal of International Trade & Economic
Development: An International and Comparative Review, 22:3, 398-429, DOI:
10.1080/09638199.2011.574723
To link to this article: http://dx.doi.org/10.1080/09638199.2011.574723
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The Journal of International Trade & Economic Development, 2013
Vol. 22, No. 3, 398–429, http://dx.doi.org/10.1080/17517575.2011.574723
Trade in tourism services: Explaining tourism trade and the

impact of the general agreement on trade in services
on the gains from trade
Camilla Jensena* and Jie Zhangb
a
School of Economics, Faculty of Arts and Social Sciences, University of Nottingham,
Jalan Broga, Semenyih 43500, Malaysia; bBornholm Centre for Tourism Research,
Denmark
(Received 17 April 2010; final version received 21 March 2011)
The article addresses two questions related with tourism as a service

trade. Can tourism be explained as other export activities? Does service
liberalisation have a positive or negative impact on tourism receipts in
destination countries? Previous research has either focused on the
demand side factors (i.e. factors of demand in the origin countries) or on
tourism as a long-run factor of economic growth. The research shows
that a complementary perspective such as that offered by trade in a
supply side perspective can render additional insights towards under-
standing tourism. This approach can explain why countries have
absolute and comparative advantage. Another finding is that tourism
as an export can be explained by some of the same destination factors
that explain other service exports. Using different panel estimators the
importance of supply side factors that are to some extent exclusive to
tourism are demonstrated: the general price competitiveness of the
destination, tourism infrastructure and the provision of safety. The
econometric models also confirm the relevance of other conventional
explanatory factors of trade in services such as GDP per capita and
internet usage. The last part of the article analyses the welfare gains
from trade under the general agreement on trade in services (GATS).
The revenue (tourism receipt) effect is decomposed into a volume
(arrival) and price effect. Results suggest that liberalisers under the
GATS gained especially from a volume effect with average higher
growth rates in the number of arrivals. There is also found to be a
positive effect on the average income earned per tourist from being a
liberaliser.
Keywords: trade in services; tourism; GATS; liberalisation of trade in
services
JEL Classifications: F10; F12; F14; L83
*Corresponding author. Email: camilla.jensen@nottingham.edu.my
© 2013 Taylor & Francis

The Journal of International Trade & Economic Development 399
1. Introduction
Trade in tourism services and the benefits of free trade in this type of
services are topics that have received less attention in international
economics. Tourism is analysed by a specialised group of people or tourism
economists with relatively little dialogue across sub-disciplines. The
objective of this article is to fill some of this gap in the literature. We
show that tourism activity not alone is decided by demand-side factors. In
other words, nations also compete in this activity by directly or indirectly
employing strategies to attract tourists. As in other industries, ‘natural’
comparative advantage based on natural resources (sun, sand and sea in
tourism) may be challenged by the rising importance of created assets such
as entertainment and culture industries, new technologies, public and

private infrastructure and institutions. A secondary objective with the
research is to understand the position of developing countries within an
industry such as tourism. Do they have a ‘natural’ comparative advantage in
this industry or is tourism yet another activity where they are overshadowed
by the developed countries?
Within mainstream economics there has evolved two different traditions
towards the analysis of service industries and trade. One approach being
central to mainstream or neoclassical economics is to juxtapose services with
manufacturing and use the same models with little adaptation. The main
argument in this stream of literature is that the economic laws are the same
for services and manufacturing industries (see, for example, Deardorf 2001).
Some authors have shown that models explaining trade in manufactures
may be equally relevant towards understanding trade in services (Kimura
and Lee 2006). The other approach is to reject the application of mainstream
models as adequate to analyse services. This group of researchers stresses the
differences between services and manufacturing starting from the basic
premise that services are intangibles that must be consumed at their point of
production (see, for example, Chesbrough and Spohrer 2006). Hence,
services are difficult to store and save for future consumption. Services
require interaction between users and producers rendering services
comparatively heterogeneous to manufactured goods (Mirza and Nicoletti
2004). Output may be more difficult to account for in a standardised way
across different service industries (Griliches 1992).
This study, being among the first to offer a globally comparative panel
data analysis on tourism as a service trade, shows that developing countries
have only comparative advantage and little absolute advantage in tourism
(as in most other industries). The OECD countries are also often the main
exporters in this industry. Our models suggest in complement to the demand
side models (which have demonstrated the importance of factors such as
travel time and cost including relative price differences and exchange rates,
see Song and Li 2008) that OECD countries are advantaged because of
400 C. Jensen and J. Zhang
technology factors, including tourism infrastructure and their better
provision of safety compared to developing countries. It is shown in a
robust econometric framework that the general price competitiveness of the
destination only matters to gaining absolute advantage or generating market
share. Hence, we can conclude that most developing countries are poor
performers in tourism since they are relatively small and mainly hold
comparative advantage. The parameter on which they can compete (price) is
overshadowed by a host of other factors that are important when attracting
tourists such as technology, public and private infrastructure including
sufficient institutions to provide safety. Maybe for this reason we also
observe that a few lucrative islands on the edge of development (for
example, Bermuda, Bahamas, Guam, Macau and Palau) are leading in the
industry as the most comparatively advantaged because they offer the best
of both worlds (superior natural endowment for tourism, island setting,
relative proximity to origin countries, better technologies and infrastructure
including the capacity to provide safety).
Section 2 gives a short review of the existing literature on tourism and
service trade. Section 3 introduces the data which is used subsequently to
explain tourism as an exporting activity for individual countries. The choice
of econometric model in relation to the identification problem is discussed in
Section 4. Section 5 gives an account of the statistical results using first
differencing for panel data (GMM). The relationship between the growth
rates in tourism receipts and liberalisation under the general agreement on
trade in services (GATS) is analysed in Section 6. Section 7 concludes the
article.
2. Trade in services
A large number of studies in the tourism literature confirm the relevance of
supply side factors. However, the tourism literature is dominated by demand
models (see Crouch 1994, and Lim 1997 or for a review of the most recent
literature, see Song and Li 2008). Tourism demand studies have shown the
importance of demand side factors such as: travel distance and time, relative
price differences between pairs of countries and exchange rates. Some of the
most important results for the supply side perspectives in the tourism
literature are discussed by Prideaux (2005) and Cruz and Rolim (2005).
Prideaux (2005) gives a broad overview of determinants of tourism flows in a
supply side perspective: natural resources, culture and distance, policy,
institutions, infrastructure, destination price, external political and health
factors. General equilibrium models have also been offered to analyse issues
related with tourism such as climate change (see, for example, Berrittella
et al. 2006). They incorporate factors of supply related with population,
income per capita and climate including fixed factors. The most comparative
study to date in a supply side perspective is given by Cruz and Rolim (2005)
who analysed international tourism flows among the developing economies
of South America, Africa and South Asia. This study confirmed the
importance of supply side determinants for international tourism flows,
including national income, tourism attractions, security risks and the
geographical distance to main markets.
Studies of trade in services use general explanatory factors of export
performance: GDP, exchange rates and internet adoption (Freund and
Weinhold 2002). Kimura and Lee (2006) show that the important workhorse
in empirical international economics being the gravity equation also works
surprisingly well (even better than mirror samples for manufacturing)
towards explaining trade in services. According to Kimura and Lee’s (2006)
study, distance is a highly significant negative factor preventing service
trade. Mirza and Nicoletti (2004) report similar results but give other
explanations besides physical distance for why gravity type of equations
work particularly well in services related with the o-ring theory of
development (Kremer 1993).1
Even though some general studies exist in service trade, most available
research focuses on single industries among which the most studied are
banking, insurance, advertising and other professional services, e.g.
consultancy. With the GATS, new areas are emerging – in particular health
and educational services. In this perspective, tourism is the odd child since it
is rarely mentioned in the economics literature. One exception is the study
by Eilat and Einav (2004). However, that study is opposite ours based on the
central premise in tourism studies being that tourism should be explained
from the demand side rather than the supply side.
Studies of banking and insurance emphasise the importance of the cross-
border supply mode through foreign direct investment (FDI) towards
generating trade (Li, Moshirian, and Sim 2003; Webster and Hardwick
2005). Most of the service trade here takes place either as intra-firm
transactions or via arms length transactions among larger and global players
in the industry. Trade in this class of services is best explained by the
presence of FDI and hence indirectly the factors that attract FDI into these
service industries. Health and educational services share features with both
banking (cross-border supply) and tourism (flow of people instead of goods)
in the way they are traded, where especially the cross-border mode of supply
has increased in importance across all activities since the conclusion of the
Uruguay round (Smith 2004).
A number of articles that deal with the relationship between tourism and
economic growth are also relevant to the present study, mainly due to the
methodological challenges of uncovering a robust relationship between
tourism, growth and level of development. For example, Hazari and Sgro
(1995) developed a dynamic model showing that tourism can have positive
effects on the long-term growth in a small economy. They proved that tourism
makes non-traded goods and services exportable, hence promoting domestic
welfare and growth. Balaguer and Cantavella-Jordá (2002) have examined the
role of tourism in the Spanish long-run economic development by using
Johansen’s cointegration methodology and Granger causality tests. Granger
causality tests confirmed the existence of a robust relationship between
economic growth and tourism expansion. Dritsakis (2004) has also examined
the relationship among the international tourism earning, real exchange rate
and economic growth in Greece by using Johansen’s cointegration test and
then Granger causality tests based on a vector error correction model. The
results of cointegration analysis suggest the existence of a cointegration
relationship between the three variables. This indicates the presence of a
common trend or a long-run relationship among these variables.
Dritsakis’ findings from causality analysis denote that international
tourism earnings and real exchange rates cause economic growth in a ‘strong
causal’ relationship, while economic growth and real exchange rate cause
international tourism earning in a ‘simple causal’ relationship.
Most of the papers focused on explaining tourism as an important factor
for economic growth. However, there are a few papers dealing with both
ways of causality. Eugenio-Martin, Moralse and Scarpa (2004) analysed the
relationship between tourism and economic growth for Latin American
countries. The study showed that only in the low and medium income
countries is tourism growth associated with economic growth. At the same
time has the Latin American study shown that tourist arrivals are positively
related with GDP per capita in all three types of countries (low, medium and
high income). Tourist arrivals in the high income Latin American countries
rely also on secondary education enrolment, while in the medium income
countries, tourist arrivals are positively related with higher expectancy of
life. In the low income Latin American countries, tourist arrivals depend on
all the three main factors: infrastructure, improvement in education and
safety. In this way, they argue that these are important three areas in which
developed countries have an absolute advantage over developing ones. The
same kind of tests was made by Oh (2005) by using data for South Korea.
Oh (2005) did not confirm the same results as Balaguer and Cantavella-
Jordá (2002) in the case of Spain. This means that cointegration between
tourism and economic growth did not exist in South Korea. On the other
hand, did Oh’s study confirm that rapid economic expansion causes a rise in
tourism receipts in South Korea?
Sequeira and Nunes (2008) apply a dynamic panel data method to test
the relationship between tourism and economic growth in different types of
countries. They have only confirmed that tourism specialisation is positively
related with economic growth in the poor countries, but not necessarily the
small countries. This result is indirectly related with the results from
Eugenio-Martin, Moralse, and Scarpa (2004).
Lee and Chang (2008) also test two-way causality between tourism
development and economic growth by using fully modified ordinary least
squares (OLS) models. They have 23 OECD countries and 32 non-OECD
countries covering the three continents of Asia, Latin America and Sub-
Saharan Africa. The results show that cointegration between GDP and
tourism development is substantial. They prove that tourism development
has a greater impact on GDP in the non-OECD countries than in OECD
countries. Their causality tests show, however, a unidirectional causality
relationship from tourism development to economic growth in OECD
countries, and bidirectional relationship in non-OECD countries. These
results also give supporting evidence for the less-developed countries,
namely that growth in economic development and better infrastructure have
a positive impact for tourism development.
Our global panel data study complements this literature in several ways.
Firstly, by taking a comparative development perspective on the factors that

generate trade in tourism services. Secondly, by adopting a panel data
approach (GMM) instead of the prevailing time series approach towards
resolving problems of endogeneity (two-way causation) and/or spurious
relationships (third unobserved factors influence the results). Another main
difference between our study and most of the available supply side literature is
that instead of analysing their particular influence, we instead control for
country fixed factors (such as distance, climate and culture) since such
structural or cross-sectional factors are less relevant to analyse under a panel
data approach (and of course ignoring that even some structural factors do
change over time, e.g. through lowering of transport cost, cultural or climate
change). At most we can treat them as nuisance parameters with the fixed effect
model, random parameters with other models or reduce them out using
dynamic models. Hence, we focus in our study on the supply side factors that
countries can and do affect through their policies and investments over time.
Compared to the literature on tourism and economic growth, this article
focuses only on the single causal relationship running from a nation’s wealth
and development towards generating tourism activities.
3. Data
The data used in the study is drawn from two main sources and a number of
complimentary sources. Tourism data is obtained from the UN World
Tourism Organization’s (UNWTOs) database (www.unwto.org) and its
publication ‘Yearbook of Tourism Statistics’. General economic data is
taken from the World Bank’s World Development Indicators (WDI)
published online (www.worldbank.org). In addition, hereto data about
liberalisation of trade in services under the GATS is taken from the World
Trade Organization’s (WTOs) online databases on trade in services
(www.wto.org). Data on political risk as an approximation to the tourist’s
perception of un-safety is taken from Freedom House (www.freedom
house.org).
Individual indicators are explained in further detail now according to the
order they are used in the subsequent sections.
Section 5 concerns the analysis of the determinants of tourism flows in
the supply side perspective of destination attractiveness. The dependent
variable in this part of the study should ideally reflect the absolute and
comparative advantage of the destination country in terms of its absolute
and relative ability to attract tourists and hence generate tourism exports.
To calculate absolute and comparative advantage tourist arrivals is used
ARRIVAL rather than receipts for two reasons. Firstly, quantities avoid
problems of cross-country comparison due to exchange rate volatility and
differential exchange rates. Secondly, data availability and reliability with
respect to arrivals is generally better than with respect to tourism receipts.
Actual data estimates of trade in tourism services from the WTO could
also have been used towards calculating absolute and comparative
advantage. However, the publication and availability of such data are of
a recent nature relative to the tourism data used in the study which goes
back to 1982.
As dependent variables are adopted measures of absolute advantage by
calculating annual shares of the market held by each country TOURSH and
comparative advantage by dividing tourism market shares with population
shares TOURSH/POPSH.2 A comparison of these variables for the year
2005 is shown in Appendix Table A1. From here it can be verified that
absolute advantage or market share in international tourism is quite
distinct from comparative advantage. Only a few countries hold both
absolute and comparative advantage in tourism. The largest economies
have absolute advantage. The top 10 countries in terms of comparative
advantage are all small and belong often to the category of lucrative island
economies.
The variables include data on level of development GDPCAP (captured
with GDP per capita), investment in tourism infrastructure ROOMS
(captured either with total hotel capacity per 1000 capita or the absolute
number of hotel rooms available), openness of the economy OPEN
(captured with the sum of total trade in GDP), adoption of new ICT
technologies INNET (captured either with the number of registered internet
users per 1000 capita or the absolute number of internet users), the price
competitiveness of the destination IPP (captured with GDP expressed in
PPP relative to GDP at official exchange rates – in other words how much
spending power that a USD denominated wage translates into in the
destination country) and finally the tourist’s perception of safety UNSAFE
(captured with the political rights index published by Freedom House
RISK), where a higher index means less political freedom or less perceived
safety. All variables that are not ratios have been log transformed to reduce
for the influence of outliers in forth-running data series. This creates more
data consistency by including ratios that already take into account or adjust
for outlier problems with inclusion of forth-running data series in the same
equation.
Section 6 analyses separately the influence of liberalisation on arrivals
and tourism receipts. The indicators hereof are: tourism receipts RECEIPT,
tourism arrivals ARRIVAL and the average estimated ex-post price
actually paid by a tourist for a travel experience PRICE. Liberalisation of
tourism services is measured by using the number of commitments
COMMIT made by each country under GATS in this particular industry.
An index of 0 measures zero commitments, whereas an index between 1
and 4 reflect countries having made commitments not to introduce new
restrictions in each of the four modes of supply specific to the tourism
industry (hotels and restaurants, travel agencies and tour operator services,
tourist guide services and other). This simple indicator assumes that each
mode has equal weight towards liberalisation. Also it is assumed with this
variable that countries showing commitment to liberalisation are generally
also those that have lifted most restrictions on their tourism services.
However, it should be noted that the GATS system is fundamentally
different from other areas of free trade under the WTO since it is based on
volition.
The data variables and their definitions are summarised in Table 1. The
variables are available in a potential panel of 190 countries and 25 years
(1982–2006). Even though the panel is fairly balanced, the data availability
and the length of the panel is country specific.
4. Model discussion
With the econometric model the aim is to estimate an export supply curve.
The main modelling problem concerns the price variable due to the problem
of identification. A general problem is that paired observations of price and
quantity (in our case tourism arrivals) are the outcome of the theoretical
relationships inherent in a supply and demand curve system. There exist
several techniques to overcome the identification problem such as the
adoption of instrumental variables that can help to pin down or identify
each curve. For panel data also advanced techniques have been developed
and several textbooks deal almost exclusively with this class of problems
(see, for example, Arellano 2003).
Another methodological issue is that of choosing the right price
information. This problem has generally been less dealt with in the
literature. For example, in tourism studies the ex-post price is often used.3
Using ex-post price information may introduce a tautological problem into
the analysis similar to the tautological problems of analysing central
relationships in national accounting data that are arrived at using identities.
With the choice of price variable, the aim is to overcome both problems at
the same time. If a price variable can be found at the level of countries that is
Table 1. Definition of study variables.
ARRIVALit Number of tourist arrivals including all international arrivals no

matter purpose of visit (leisure or business) using UNWTO
data.
COMMITi Number of commitments (from 0 to 4) each country has made
under the GATS agreement in tourism services using WTO
data (www.wto.org).
COMDUMi A dummy that takes the value of 1 if a country at all is committed
to reform of its trading system related with tourism.
DUMMY95 A dummy that takes the value of 1 for all years after 1995 where
the internet is generally introduced according to the sampled
data from the World Bank.
GDPCAPit Level of development and general state of technology measured
by the income per capita as calculated by the World Bank in

USD in 1995 prices.
INNETit The absolute number of internet users from World Bank WDI
data.
INNETpmcapit Number of per 1000 capita internet users using World Bank WDI
data.
ISLANDi Defined in this study as countries without a land lock and with a
local population less than 15 million (which includes Cuba but
excludes Australia).
OPENit Openness measured as total trade (imports and exports) over
GDP as calculated by the World Bank in the WDI series.
POPit Total population measured using World Bank WDI data.
POPSHit Population share calculated by dividing country populations with
the global population using World Bank WDI data.
IPPit The international price competitiveness of the destination
measured by the ratio of GDP in PPP to GDP at the market
exchange rate (both series in USD using current price data)
using World Bank WDI data.
PRICEit The average real price paid per tourist for a travel to the country
in USD, calculated by dividing total real receipts with total
arrivals using UNWTO or World Bank WDI data.
RECEIPTit Total real gross receipts in mio. 2000 USD (using UNWTO or
World Bank WDI data) that a country is estimated to earn
from its tourism industry. According to the UNWTO, receipts
include an estimate of all expenditures of tourists while
vacating on lodging, food, fuel, transport, entertainment and
shopping. It excludes however receipts related with interna-
tional transport. For purposes of deflation is used the US
deflator from the WDI series.
ROOMSit The absolute number of hotel rooms according to UNWTO data.
ROOMSpmcapit Hotel capacity in number of rooms per 1000 capita using
UNWTO data and population data from the World Bank
WDI data.
UNSAFEit How safe it is to visit the destination country measured by using
the political rights index calculated by Freedom House.
TOURSHpmit Market share in promille in tourism calculated by dividing
tourism arrivals for each country with the global number of
arrivals using UNWTO data.
both ex-ante and exogenous to the system analysed then both problems have
been overcome.
The general export supply equation to be estimated takes the following
form, where export supply or quantity of exports is modelled as a linear
function of price (which takes an expected negative sign) and a number of
other relevant explanatory variables V such as supply side factors including
tourism infrastructure:
XSi ¼ a0 þ b0 Pi� þ gn Vi þ ei ð1Þ
Fitting the equation to the data, the final equation to be estimated takes
the following form when estimated as a fixed effect model:
TOURSHpmit ¼ ai þ b0 IPP þ Pit þ g1 LogðGDPCAPÞit þ g2 LogðROOMSÞit

þ g3 LogðINNETÞit þ g4 OPENit þ g5 UNSAFEit þ lt þ eit
ð1aÞ
Or estimated using first differencing with a lagged dependent variable

where the fixed effects drop out (but maintaining the fixed year effects l) the
equation to be estimated takes the following form:
DTOURSHpmit ¼ a0 TOURSHpmit�1 þ b0 DIPPitþ � g1 DLogðGDPCAPÞit

þ g2 DLogðROOMSÞit � g3 DLogðINNETÞit þ g4 DOPENit
þ g5 DUNSAFEit þ lt þ eit ð1bÞ
Note that the expected sign for the price variable changes (from negative
to positive) in the applied version of equation (1) because of the way price is
measured in the study. Price takes outset in the perspective of the foreign
currency holder, hence when IPP is higher it implies that the price of
tourism activities in the destination country is lower.
To explain comparative advantage, a population weighted version of
equation (1b) is adopted (the weights are applied to forthrunning
variables whose size will co-vary with country size – that is ROOMS
and INNET):

TOURSH TOURSH
D ¼ a0 þb DIPPit þ g1 DLogðGDPCAPÞit
POPSH it POPSH it�1 0
þ g2 DLogðROOMSpmcapÞit þ g3 DLogðINNETpmcapÞit
þ g4 DOPENit þ g5 DUNSAFEit þ lt þ eit ð1cÞ
To test the assumption of exogeneity between our price IPP and quantity
variables TOURSH and TOURSH/POPSH a Granger causality test was
undertaken (see Appendix Table A2). If the price passes the exogeneity
assumption we should find a causal relationship running from the price to
the quantity variables but not the reverse. The Granger shows a strong
causal relationship in particular running from quantity to price.4 This is
puzzling since our price variable is so aggregate that it should not be
possible to be strongly affected by tourism activities except in those
countries that are highly dependent on tourism. Also we found that on a
regional basis this causal relationship disappears. This indicates a spurious
relationship inherent in the data that is not related with the identification
problem. Pearson correlation coefficients (see Appendix Table A3) confirm
that there may be a spurious relationship between the price variable IPP, the
quantity variable TOURSH and the level of income GDPCAP. Lower
priced countries (using our price variable IPP) are the less developed
countries because of their stronger incubation from international transmis-
sion mechanisms on their internal price levels. (At the same time will
devaluation also lead to improvement in IPP since GDP at official exchange
rates diminishes following a devaluation whereas GDP at PPP is the same.)
These countries are at the same time generally less competitive in tourism
activities especially when measured on TOURSH. Therefore, the price
variable passes the exogeneity test but its investigation introduces instead a
spurious relationship into the analysis. For this reason, the first difference
approach is the best approach to the data from a time series perspective. In
panel data econometrics, this translates into the choice of the general
method of moments (GMM) estimator (see, for example, Bond 2002, 15).
5. Econometric results
Results of the panel data analysis are shown with Table 2 (absolute
advantage or market shares) and Table 3 (comparative advantage or
population weighted markets shares), respectively. Sub-sample results by
income groupings are reported in Section 5.2.
5.1. Results for the full sample

First is discussed the performance of the panel data models, then the results
are interpreted specifically with respect to individually explained and
explanatory variables. The section rounds off with special attention paid to
the internet and its differential role over the period analysed.
The fixed effect model generally performs poorly on the data because of
its emphasis on within country variation. All the between country variation
in the data is in this model captured with the fixed effects. The random
effects model performs slightly better because as a mixed model it gives more
weight to the cross-section dimension in the data. Both models suffer under
severe problems of auto correlation even though both include time fixed

Table 2. Panel data results, absolute advantage.
Panel method GMM (FD) GMM (FD) GMM (FD) GMM (FD) GMM (FD)
Dependent variable: TOURSHpm TOURSHpm TOURSHpm TOURSHpm TOURSHpm
Explanatory vars: equation (1b.1) equation (1b.2) equation (1b.3) equation (1b.4) equation (1b.5)
LDV 0.87*** 0.89*** 0.81*** 0.80*** 0.72***
(40.63) (43.82) (29.65) (32.75) (24.27)
IPP 1.04*** 0.75** 1.37*** 1.00** 1.26***
(2.45) (1.89) (2.61) (2.41) (2.38)
Log (GDPCAP) 3.48** – 10.82*** 8.46*** 11.17***
(2.03) (4.70) (4.53) (4.69)
Log (ROOMS) 1.43*** 1.45*** 3.22*** 70.07 1.18
(2.67) (2.72) (4.64) (70.12) (1.45)
Log (INNET) 70.01 0.00 0.08* 0.36*** 0.23**
(70.29) (0.04) (1.74) (4.99) (1.98)
(Log (INNET))2 – – – 70.03***
(75.94)
OPEN 0.02* 0.03*** 0.03** 0.03** 0.06***
(1.73) (2.54) (2.00) (2.09) (2.98)
UNSAFE 70.78*** 70.72*** 70.94*** 70.84*** 70.81***
(72.73) (72.55) (72.67) (72.99) (72.81)
DUMMY95 – – 711.89*** – –
(77.84)
Country effects FD FD FD FD FD
Time effects Yes* Yes* Yes** Yes* Yes***
Number of obs. 2100 (1987–2005) 2100 (1987–2005) 2100 (1987–2005) 2100 (1987–2005) 1335 (1995–2005)
AR(2) 0.05 0.05 0.04 0.04 70.04
w2 (Sargan-test) (987, 183)*** (1003, 184)*** (596, 182)*** (1006, 182)*** (654, 147)***
Notes: The table reports in parenthesis t-statistics based on the ‘difference specification instrument weighting matrix’ that can be calculated using Eviews
software rendering consistent standard errors in a panel data set that is transformed using first differencing. The parameter estimates are significant at the
***1% level, **5% level and *10% level.
Table 3. Panel data results, comparative advantage.

410
Panel method GMM (FD) GMM (FD) GMM (FD) GMM (FD) GMM (FD)
Dependent variable: TOURSH/POPSH TOURSH/POPSH TOURSH/POPSH TOURSH/POPSH TOURSH/POPSH
Explanatory vars: equation (1c.1) equation (1c.2) equation (1c.3) equation (1c.4) equation (1c.5)
LDV 0.47*** 0.48*** 0.47*** 0.48*** 0.50***
(14.22) (14.63) (13.82) (14.37) (13.88)
IPP 70.36 71.09*** 70.36 0.10 71.30***
(70.73) (72.60) (70.71) (0.20) (72.47)
Log (GDPCAP) 4.72*** – 4.72*** 4.40*** 4.06***
(2.73) (3.72) (2.53) (2.16)
Log (ROOMSpmcap) 3.35*** 3.68*** 3.35*** 3.93*** 2.48***
(3.93) (4.27) (3.79) (4.46) (2.96)
Log (INNETpmcap) 70.88*** 70.77*** 70.88*** 71.22*** 70.66***
(76.78) (76.11) (76.77) (76.88) (74.27)
(Log (INNETpmcap))2 – – – 0.08*** –
(2.80)
OPEN 70.03*** 70.02*** 70.02*** 70.03*** 70.02*
(73.73) (73.41) (73.72) (74.28) (71.94)
UNSAFE 72.07*** 72.02*** 72.07*** 72.08*** 72.01***
C. Jensen and J. Zhang
(79.99) (79.59) (79.92) (79.98) (78.18)

DUMMY95 – – 0.05 – –
(0.02)
Country effects FD FD FD FD FD
Time effects Yes* Yes** Yes* Yes* Yes*
Number of obs. 2099 (1987–2005) 2099 (1987–2005) 2099 (1987–2005) 2099 (1987–2005) 1333 (1995–2005)
AR(2) 70.06 70.07 70.06 70.06 70.22
w2(Sargan-test) (517, 183)*** (504, 184)*** (517, 182)*** (504, 182)*** (521, 147)***
Notes: The table reports in parenthesis t-statistics based on the ‘difference specification instrument weighting matrix’ that can be calculated using Eviews
effects. Hence, results are only reported for the GMM model in the final
version of the article.
The GMM model is as expected much superior compared to the other
models. First of all, does it allow to analyse the full variation in the data
without the side effects caused by inclusion of the fixed effect for the cross-
sectional dimension. Furthermore, GMM avoids spurious relationships
because of the level effects in the data associated with development. Finally,
auto correlation is reduced through the inclusion of lagged dependent
variables. The Sargan test of over identifying restrictions passes at a very
high level of significance for all the models estimated. The lagged values of
the dependent variable by a higher order rather than by its first lag are used
as instruments.
The main difference between columns 1–5 in Tables 2 and 3 concern in

particular the internet variable because it causes a set of particular problems
in this study. The internet variable is censored from the bottom due to its
introduction only in the second half of the present dataset. Whereas a lot of
attention has been paid to censoring with respect to the dependent variable
in applied econometrics, there is very little treatment of censoring problems
with respect to independent or explanatory variables.
Column 1 in Tables 2 and 3 shows the results for estimating Equations
(1b) and (1c) in their general form. In column 2, we check for the robustness
of the IPP variable by excluding GDPCAP due to the fact that an element of
variation in IPP can be seen to be mechanically covariant on the GDPCAP
variable (simply because the GDPCAP variable is the denominator of the
IPP variable). However, the reported Pearson correlation coefficients in the
Appendix also suggest that multicollinearity is not a major problem because
of the mechanical co-variation induced. Columns 3–5 show different
variations on column 1 owing to the censoring problem with the variable
INNET. In column 3, a dummy is adopted that takes the value of 1 for all
years after the introduction of the internet (1995 and henceforth). Column 4
instead takes a non-linear approach by inclusion of a squared term since it
may give greater weight to the observations in the data for which the
variable takes on positive values. Finally, in column 5 the more traditional
approach of analysing instead on the reduced time series 1995–2006 is
adopted. All three approaches render similar result as discussed further
below.
Towards explaining absolute advantage or market shares, the price
variable has the expected sign and is significant. For comparative advantage,
the results for the price variable take the wrong sign and/or are not
significant. Especially for the relative or population weighted market share
there can be a real problem with the exogeneity assumption for the price
variable. The lucrative islands that register a very high comparative
advantage may rely strongly on tourism for their exports which also implies
that their internal price levels are strongly affected by tourism activities.
Hence, there may be an endogenous dynamic relationship between
comparative advantage and IPP which gives the opposite sign from what
was expected. The same results and problem may apply to some extent also
for the openness variable. Countries with absolute advantage in tourism are
also typically more open, however, the effect is oppositely negative when
explaining comparative advantage, again this may also be because of overt
reliance on tourism among countries that register particularly high on the
comparative advantage indicator (see also Appendix Table A1).
All the other explanatory variables perform with the expected sign and
are significant towards explaining both absolute and comparative advantage
in tourism. It is generally confirmed that countries with higher levels of
income generate more tourism activities. Countries that build tourism
infrastructure also attract more tourists. Finally, countries that have the
necessary institutions to provide safety also attract more tourists. Only
the internet did not render the result we expected. Therefore, we adopted
the above mentioned strategies to control for the censoring problem. In the
interpretation of these results, it may also be informative to consider the
enclosed Figure 1 showing the general evolution in average market share
plotted against the average internet adoption rate.
The analysis confirms the suspicion that the insignificance of the internet
variable is related with the censoring problem. The inclusion of the dummy
shows that after 1995 there is a general decline in the average market share
Figure 1. Mean market shares and internet users 1982–2006.

and it is very likely related with the greater competition that the internet
introduces in this industry. Once the average decline in market share is
controlled for the diffusion of the internet is a relevant explanatory factor of
tourism exports. The results in column 4 are less straightforward to
interpret. It may not be that this result is obtained because of a non-linear
effect, but perhaps rather because the inclusion of a squared term gives
greater weight in the interpretation of this particular variable for the later
period where the variables take on positive values.
The plot of the mean market share (Figure 1) and the mean internet
adoption rate also confirmed that mean market shares declined around
the date of the introduction of the internet (suggesting stronger
competition among destinations through entry) after which old or new
market shares were gradually re-established sometime into the 1990s. The
effect of the internet can also be related with the increase in international
trade and openness that is likely to generate more commercial or business-
related tourism activities. A complicating factor is however also that in
the same period many ‘new’ countries enter the world economy such as
the European transition countries which could be a competing explana-
tion for the decline in the mean market share. This factor is discussed
further below when discussing the results by estimating the model for
absolute advantage within the more homogenous sub-samples of income
groupings.
5.2. Results for the income sub-samples

Using the preferred specification from Table 2 (equation [1b]) the results for
absolute advantage are estimated for the sub-samples of high, medium and
low income groups using the World Bank’s income group rankings (as of
2010). These results are reported with Table 4 in the first column for the full
sample and in subsequent columns by the income groups high, medium and
low, respectively. For the high income group, the model performs quite
similar to that for the full sample, however, there are also some differences.
The price variable takes on greater importance within the group of high
income countries. Oppositely is infrastructure less important, suggesting
that high income countries are over-capacitated in the industry. The internet
is important, whereas neither openness nor safety is important, simply
because the variation in these variables among the high income countries is
very small. The importance of these variables changes when moving to the
middle income group – e.g. here rooms and openness play a greater role and
the internet a lesser role when comparing countries’ market shares within
that group. The model performs generally poorly towards understanding
competition for market share within the group of low income countries,
where even price differences do not matter. These changes in results are
necessarily driven by the fact that the full sample results are a composite of
Table 4. Panel data results, absolute advantage by income groupings.

414
Panel method GMM (FD) GMM (FD) GMM (FD) GMM (FD)
Dependent variable: TOURSHpm TOURSHpm TOURSHpm TOURSHpm
equation (1b.3) equation (1b.3) equation (1b.3) equation (1b.3)
Sub-sample: FULL SAMPLE HIGH INCOME MEDIUM INCOME LOW INCOME
Explanatory vars:
LDV 0.81*** 0.78*** 0.81*** 0.63***
(29.65) (21.43) (33.79) (15.79)
IPP 1.37*** 4.46*** 0.41** 70.01
(2.61) (3.76) (2.12) (71.35)
Log (GDPCAP) 10.82*** 13.96*** 5.59*** 0.19***
(4.70) (3.75) (5.24) (3.25)
Log (ROOMSpmcap) 3.22*** 70.68 0.87** 0.01
(4.64) (1.18) (2.40) (0.65)
Log (INNETpmcap) 0.08* 0.36*** 70.15*** 70.00
(1.74) (3.62) (73.65) (70.28)
OPEN 0.03** 70.01 0.02*** 0.00***
(2.00) (70.36) (3.52) (4.82)
UNSAFE 70.94*** 70.22 70.12 70.00
(72.67) (70.42) (71.06) (70.49)

DUMMY95 711.89*** 712.44*** 71.31 0.02
(77.84) (77.08) (70.58) (0.25)
Country effects FD FD FD FD
Time effects Yes** Yes** Yes Yes
Number of obs. 2100 (1987–2005) 564 (1987–2005) 1156 (1987–2005) 380 (1987–2005)
AR(2) 0.04 0.07 70.07 70.08
w2(Sargan-test) (596, 182)*** (407, 182)*** (757, 182)*** (367, 177)***
Notes: The table reports in parenthesis t-statistics based on the ’difference specification instrument weighting matrix’ that can be calculated using Eviews
within and between income group differences, whereas the sub-sample
results alone come about due to within group differences. The variable that
captures the capacity to provide safety UNSAFE is only relevant according
to these results for the full sample.
6. Gains from GATS in tourism

6.1. Expected gains from liberalisation
The expected gains from liberalising trade in services are fundamentally no
different from the equivalent welfare gains of liberalising trade in
agricultural and manufactured products (Hoekman and Primo Braga
1997). The gains from liberalising services are considered to be substantial
not least due to the positive spill-overs it may have on trade in goods
(Deardorf 2001) and also for diffusion of technology (Robinson, Wang, and
Martin 2002). However, in services particular industries have been singled
out which may take national priority such as health, education and the
financial sector (Wade 2003; Wahba and Mohieldin 1998). Within tourism,
traditional arguments against liberalisation are typically invalid (protection-
ism makes little sense in its original form, even though some countries
conduct campaigns encouraging their citizens to vacate at home). The main
reason for this is that national and international tourism is considered to be
weak substitutes. Generally, liberalisation must be considered a win-win
game since liberalisation is expected to generate more tourism overall
through lower prices or higher quality of services (and not accounting for
the negative externalities that tourism may have on the environment because
of the aviation industry).
The main argument against liberalisation of tourism service industries
has centred on leakages from the income generated in tourism and its
multiplier effects (Dwyer and Forsyth 1997). Wagner (1997) shows that if
most of the tourism industries’ inputs (commodities and capital) in the
region are imported, it will generate only a small economic impact in the
region. At stake is therefore the cross-border mode of supply since foreign
investment may significantly alter input–output structures in destination
countries and thereby also streams of direct income, profits and last but not
least lead to an increased volatility in tourism flows (Gereffi 1999;
Oppermann and Chon 1997).
No larger scale quantitative studies exist to estimate the cost and benefits
from liberalisation in tourism services and there has hardly been any focus
on the price and income effect that liberalisation may have on tourism
receipts. From a demand-side perspective, it may be anticipated that since
tourism is a luxury good with an income elasticity above one it has a positive
terms-of-trade effect for the exporting countries. However, a positive terms-
of-trade effect may be difficult to realise for those destinations that fail to
implement new technologies and thereby realise higher receipts through
differentiation strategies. Increasing competition through liberalisation for
countries on the lowest tier on the technology ladder may also imply a terms
of trade loss.
6.2. Analysis of changes in tourism receipts over time

Tourism receipt is a measure similar to export revenue since it estimates what the
destination country earns from exporting tourism services. However, compared
to traditional exports there are several problems involved with correctly
estimating tourism service exports. One problem concerns what is included
under tourism receipts and what is not, where for example earnings from air
transportation will typically not be included. A second related problem
concerns who earns what? Receipts are typically estimated as gross receipts not
taking into account, e.g. leakages due to imports, and the repatriation of profits
and wages earned by foreigners in the destination country. However, even
though tourism consumption is highly composite, this is also a problem when
estimating export performance in general. The sensitivity of host country
earnings to a multiplicity of factors and the attention tourism researchers have
paid hereto, has paved the way for the elaboration of a highly specific set of
national accounts. These accounts called tourism satellite accounts give a more
exact picture of tourism in the national economy (UNWTO 2007b; UNWTO
2009). Unfortunately, such accounts are in their early development and hence
not useful toward making cross-country comparisons on a larger scale such as is
the objective in this study.
For the present purposes, it is therefore necessary to rely on gross
receipts and arrivals towards decomposing gross receipts into a price
(receipts over arrivals) and an arrival component.
Revenue from tourism or receipts may be written as the product of price
and quantity. As price is used as receipts over number of tourists to capture
the average aggregate price, a tourist pays for a trip to the destination
country (which is sensitive to length of stay but data is not consistently
available here for our panel) . Quantity is taken as the number of arrivals of
tourists to the destination country. Hence, a change in gross revenue may be
written as:
DReceipt ¼ DPrice � Arrival þ DArrival � Price þ DPrice � DArrival ð2aÞ
The interaction effect is typically quite small. Focusing on the main

effects, the relative change in net receipts may be expressed as the sum of the
relative changes in price and quantity:
DReceipt DPrice DArrival

� þ ð2bÞ
Receipt Price Arrival
In other words, the growth rate in tourism receipts can be accounted for
by its main components which are growth rates in arrivals and price of the
travel experience, respectively.
6.3. Results of the receipts analysis

Ideally trade liberalisation in services could be measured by the cross-border
mode of supply such as the level of foreign direct investment in the service
activities of hotels and restaurants. Unfortunately, such level of detailed
FDI data is not available for the large sample of countries covered in the
study. Instead, trade liberalisation is measured as the political willingness of
countries to liberalise their tourism service industries. This measure is also in
some sense superior to other measures such as FDI. However, it suffers from
a major problem in relation to panel data analysis due to its time invariant
nature. Hence, it cannot be included in the previous model framework (e.g.
asking whether absolute or comparative advantage increases with liberal-
isation or whether the comparatively advantaged gain more etc.) and must
be analysed separately in a reduced model such as the decomposition model
offered above.
Based on this, a simple set of structural equations using the between
effect estimator and with controls for island effects and level of development
are used. Ideally, a country specific effect should also be included, but since
the COMMIT variable is perfectly collinear herewith it is not possible to
control for the country specific effect.5 This also leads to the choice of the
between effect estimator whereby both the dependent and independent
variables becomes the average growth rate over the period of study. Similar
to a cross-section study a between effect panel data model emphasises only
the variation between countries and hence excludes the differences within the
time series of the same country.
Table 5 shows the distribution of the 190 countries and the sub-category
of islands by commitment level. It is necessary to control for the island
effect, because islands are generally less likely to be committed to free trade
in tourism. We also control for level of development using GDPCAP,
Table 5. Number of countries by commitment level.
Commitment level No. of countries (hereof islands)

0 54 (24)
1 20 (10)
2 43 (5)
3 61 (4)
4 12 (3)
Total 190 (46)
418
Table 6. Are there gains from liberalisation of services trade in tourism?
Panel method BE BE BE
Dependent variable: gR gA gP
Constant 70.29*** 70.31*** 74.87 75.76* 70.36*** 70.38***
(73.33) (73.54) (71.34) (71.60) (74.68) (74.92)
COMMITi 0.019* – 0.67 – 0.019** –
(1.72) (1.43) (1.93)
COMDUMi – 0.031 – 2.32*** – 0.037
(0.99) (1.78) (1.31)
ISLANDi 0.008 70.006 1.33 1.11 0.031 0.018
(0.24) (70.18) (0.93) (0.81) (1.01) (0.61)
Log (GDPCAP)i 0.03*** 0.033*** 0.34 0.39 0.030*** 0.033***
(2.72) (3.18) (0.76) (0.90) (3.15) (3.64)

Number of obs. 2194 2194 2731 2731 2098 2098
Countries 162 162 163 163 160 160
R2 0.09 0.08 0.02 0.03 0.12 0.10
Notes: The table reports in parenthesis t-statistics. The parameter estimates are significant at the ***1% level, **5% level and *10% level.
because developing countries as a group are less likely to be committed to
free trade. In the subsequent analysis, the commitment variable is either
adopted as a 0–4 variable where the effect of commitment for tourism is
expected to be linearly increasing in the extent of free trade reform.
Alternatively, the commitment variable is adopted as a simple dummy
variable COMDUM which takes the value of 1 if a country at all is
committed to the reform of its trading system in the area of tourism.
The results of the receipt analysis are shown in Table 6. It is found that
there is a significant impact of liberalisation on receipts (gR) through both
its main channels of arrival (gA) and average travel price (gP). Non-
committers (as captured with the constant) experienced in the study period
significantly lower and negative growth rates in both of the main
components of receipts. The effect for arrivals is much larger when using
the variable COMDUM; however, the price effect is equally significant and
negative for the group of non-committers using either of the commitment
variables.
The World Bank has published a more consistent time series covering the
period 1996–2005. It was checked if the results of the analysis changed when
using this slightly shorter but more reliable series.
A note of caution with respect to the results obtained for the receipt
analysis concerns the problem of two-way causation. There may be a self-
fulfilling prophecy bias in the observations made, e.g. countries that expect
to gain more from liberalisation (e.g. large countries with significant
established market share) may be more likely to liberalise their service trade
relative to less developed countries and regions that expect to gain less from
liberalisation.
7. Discussion and conclusion

The objective of the study is to be one of the first to offer a global study of
tourism exports on the supply side of the industry. Whereas many studies
have focused on the economic growth effects of tourism in a global
comparative perspective, there are fewer global studies available of the
factors that explain exports taking outset in a traditional international trade
or supply oriented approach. In this way, our study complements the
existing literature by taking a comparative development perspective on the
factors that generate trade in tourism services.
Using the general methods of moment estimator as preferred econo-
metric strategy in the study, we find that the identified study variables,
decided by literature review and data availability, all are relevant
explanatory factors especially towards understanding established market
shares in the industry or absolute advantage in tourism activities. Variables
such as price levels, income levels and tourism infrastructure play the role
that we conventionally would expect in a supply side perspective.
Destinations which offer a comparatively better purchasing power to the
international currency holder (in USD terms) attract a higher absolute
number of tourists compared with other destinations. This relationship
for price and quantity was however not confirmed when trying to analyse
comparative advantage. For comparative advantage, reverse causality
may be a real problem due to high dependence on tourism activities
among island communities and small destinations where such activities
spills over on local price levels (similar to the Samuelson–Balassa effect in
traditional traded sectors). Countries with higher income levels and better
developed tourism infrastructure were found to hold both absolute and
comparative advantage in the industry. Countries that indirectly cater to
tourists by offering better institutions in terms of their capacity to
provide perceptions of safety are those that hold both absolute and
comparative advantage in the industry.
The internet was found to play a different role. Its lacking significance at
first led to a sample splitting exercise around the time when the diffusion of
the technology was registered to have taken off (1995). The results suggest
that after 1995 the internet became important towards building market
share in the industry (whereas established infrastructure or capacity
declined), even though it has initially been less important for countries
that hold comparative advantage.
A splitting of the sample by income groupings confirmed the results for
the full sample. The models perform best for the high and middle income
countries whereas for low income countries it performs poorly. This likely
owes to the lack of dynamics in the data for low income countries.
Especially, results for the variable UNSAFE was driven mainly by the
between country variation in the full sample.
A secondary objective of the research is to investigate with available data
whether liberalisation under the WTO’s Uruguay Round in the area of
services (GATS) has had any impact on an industry such as tourism. A
simple decomposition exercise of revenue growth into its main components
of arrival and price growth is undertaken. These very preliminary results
show that liberalisation may have had a positive but also weakly
differentiated effect on both the main components of export revenue in
tourism. The results come about mainly because non-liberalisers are
significantly and negatively penalised both in terms of average negative
growth rates in their arrival and gross prices obtained per tourist arrival.
Several improvements would be necessary to strengthen the conclusions
from the receipt analysis and its relationship with trade liberalisation. It
would be in particular desirable to observe net receipts rather than gross
receipts for purposes of estimating the impact of liberalisation on national
welfare. Another problem related especially with the results for the price
effect is that rather than measuring average price per travel a more valid
measure would be the average price per tourist day.
As data availability for an industry such as tourism improves better,
more detailed analysis will be possible.
Notes
1. Michael Kremer’s o-ring theory of economic development is based on the idea of
the need for positive assortative matching in production – e.g. output is
maximised when similarly skilled people work together.
2. With neutral comparative advantage (toursh/popsh¼1), a person from one
country is as likely to service a person from another country as the next. When a
country has comparative advantage its citizens are more likely to service a person
from another country.
3. That is the price that can be arrived at by using the accounting identity that the
income from tourism divided with the number of arrivals must be equal to the
average price paid for a travel (as we use towards analysing the impact of trade
liberalisation in Section 6).
4. If this was a true causal relationship, it would imply something similar to the
Samuelson–Balassa effect, e.g. that the upward pressure on local prices and
productivity caused by tourism activities is transmitted to the prices and
productivities in other non-tourism sectors.
5. This has the consequence that the panel structure of the data in this case cannot
help to reduce the problem of unobserved variables. A third factor that is not
observed such as political regime may be the underlying explanatory factor, e.g.
of both a low level of commitment towards liberalisation of services and
resulting growth rates in receipts RECEIPT and its main components of tourist
arrivals ARRIVALS and average travel price PRICE.
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Appendix
Table A1. Comparison of dependent variables in 2005.

ARRIVAL
TOURSH/POPSH TOURSH (The (Absolute
(Number of tourists country’s share number of annual
served per year of the global tourist arrivals
Country per capita) tourism industry) in thousands)
Macau 152.5973 0.011173 9014.0
Aruba 58.52968 0.000909 733.0
Guam 58.34333 0.001522 1228.0
N Mariana Islands 49.66917 0.000617 498.0
Bahrain 43.24968 0.004851 3914.0
US Virgin Islands 42.36229 0.000713 575.0
Bahamas 39.83457 0.001993 1608.0
Palau 34.26695 0.000107 86.0
Bermuda 34.01611 0.000335 270.0
Cayman Islands 29.89991 0.000208 168.0
Hungary 28.71980 0.044834 36172.0
Cyprus 26.10450 0.003061 2470.0
Iceland 23.50718 0.001080 871.0
Malta 23.24269 0.001451 1171.0
St Kitts-Nev 21.19023 0.000157 127.0
Austria 19.40822 0.024730 19952.0
Hong Kong 17.36563 0.018311 14773.0
Luxembourg 16.01046 0.001132 913.0
Saint Lucia 15.45492 0.000394 318.0
Croatia 15.26132 0.010495 8467.0
Barbados 15.03386 0.000679 548.0
San Marino 14.20019 6.20E-05 50.0
Ireland 14.12067 0.009089 7333.0
Singapore 13.29248 0.008775 7080.0
Seychelles 12.46259 0.000160 129.0
Liechtenstein 11.52360 6.20E-05 50.0
Estonia 11.30445 0.002355 1900.0
Maldives 10.71300 0.000490 395.0
Spain 10.31864 0.069303 55914.0
Greece 10.29675 0.017695 14276.0
(continued)
Table A1. (Continued).
ARRIVAL
France 9.999256 0.094201 76001.0
Qatar 9.183946 0.001132 913.0
Dominica 8.787548 9.79E-05 79.0
Switzerland 7.784805 0.008960 7229.0
PuertoRico 7.546117 0.004569 3686.0
Grenada 7.444897 0.000123 99.0
Botswana 7.306845 0.002076 1675.0
Denmark 6.948669 0.005824 4699.0

Norway 6.684914 0.004783 3859.0
French Polynesia 6.516603 0.000258 208.0
Belize 6.504833 0.000294 237.0
St Vincent G 6.453535 0.000119 96.0
Slovenia 6.225367 0.001927 1555.0
Swaziland 5.941176 0.001040 839.0
Fiji 5.319629 0.000682 550.0
Belgium 5.156779 0.008363 6747.0
Malaysia 5.129785 0.020366 16431.0
Tunisia 5.093309 0.007905 6378.0
Bulgaria 5.005048 0.005995 4837.0
Italy 4.989658 0.045257 36513.0
Czech Republic 4.958370 0.007853 6336.0
Netherlands 4.913351 0.012410 10012.0
Mauritius 4.902281 0.000943 761.0
Finland 4.793648 0.003892 3140.0
Lithuania 4.691389 0.002479 2000.0
Canada 4.652363 0.023265 18770.0
New Zealand 4.583823 0.002933 2366.0
Jamaica 4.462297 0.001833 1479.0
Samoa 4.443462 0.000126 102.0
Jordan 4.420696 0.003702 2987.0
Uruguay 4.380312 0.002241 1808.0
UK 3.985404 0.037147 29970.0
Latvia 3.885215 0.001383 1116.0
New Caledonia 3.449766 0.000125 101.0
Tonga 3.385372 5.21E-05 42.0
Poland 3.189674 0.018840 15200.0
Cape Verde 3.128929 0.000245 198.0
Costa Rica 3.107520 0.002081 1679.0
Namibia 3.085111 0.000964 778.0
Suriname 2.832078 0.000198 160.0
Trinidad Tbg 2.801285 0.000574 463.0
Saudi Arabia 2.784185 0.009962 8037.0
Vanuatu 2.305619 7.68E-05 62.0
(continued)
ARRIVAL
Lebanon 2.276425 0.001413 1140.0
Turkey 2.253029 0.025128 20273.0
Slovakia 2.252365 0.001878 1515.0
Israel 2.201303 0.002359 1903.0
Romania 2.161562 0.007237 5839.0
Germany 2.087943 0.026648 21500.0
Australia 1.983398 0.006262 5052.0
Panama 1.739826 0.000870 702.0

Mexico 1.702557 0.027163 21915.0
Kazakhstan 1.661841 0.003896 3143.0
Cuba 1.608196 0.002802 2261.0
Morocco 1.552483 0.007242 5843.0
Thailand 1.470392 0.014337 11567.0
Syria 1.427657 0.004175 3368.0
El Salvador 1.385990 0.001430 1154.0
Micronesia 1.382627 2.35E-05 19.0
United States 1.329096 0.060989 49206.0
Guyana 1.267177 0.000145 117.0
South Africa 1.258575 0.009134 7369.0
Lesotho 1.229134 0.000377 304.0
Marshall Islands 1.139317 1.12E-05 9.0
Azerbaijan 1.123290 0.001459 1177.0
Russia 1.115596 0.024715 19940.0
Mongolia 1.059910 0.000419 338.0
Nicaragua 1.043899 0.000882 712.0
Georgia 1.002588 0.000694 560.0
Korea South 0.998830 0.007465 6023.0
Chile 0.996253 0.002512 2027.0
Zimbabwe 0.951691 0.001932 1559.0
Lao 0.950224 0.000833 672.0
Egypt 0.906322 0.010218 8244.0
Armenia 0.846629 0.000395 319.0
Guatemala 0.829275 0.001631 1316.0
Cambodia 0.816069 0.001763 1422.0
Argentina 0.805083 0.004828 3895.0
Honduras 0.788690 0.000834 673.0
Sao Tome Pm 0.577230 1.36E-05 11.0
Gambia 0.549766 0.000138 111.0
Ecuador 0.527959 0.001067 861.0
Senegal 0.523251 0.000953 769.0
Kyrgyzstan 0.490484 0.000390 315.0
Zambia 0.466789 0.000829 669.0
Paraguay 0.462993 0.000423 341.0
(continued)
ARRIVAL
Bosnia Herzg 0.459616 0.000269 217.0
Bolivia 0.439608 0.000625 504.0
Peru 0.436354 0.001842 1486.0
Japan 0.421716 0.008339 6728.0
Algeria 0.351762 0.001789 1443.0
Kenya 0.345563 0.001904 1536.0
Djibouti 0.298763 3.72E-05 30.0
China 0.287381 0.058018 46809.0

Comoros 0.266746 2.48E-05 20.0
Malawi 0.265226 0.000543 438.0
Philippines 0.248413 0.003251 2623.0
Kiribati 0.242694 3.72E-06 3.0
Brazil 0.225396 0.006517 5258.0
Sri Lanka 0.223555 0.000680 549.0
Venezuela 0.212751 0.000875 706.0
Indonesia 0.181633 0.006200 5002.0
Bhutan 0.176016 1.74E-05 14.0
Solomon Island 0.169530 1.24E-05 10.0
Colombia 0.166252 0.001156 933.0
Benin 0.166021 0.000218 176.0
Ghana 0.152466 0.000532 429.0
Burundi 0.150827 0.000183 148.0
Eritrea 0.146848 0.000103 83.0
Burkina Faso 0.140826 0.000304 245.0
Congo 0.135336 7.56E-05 61.0
Uganda 0.129483 0.000580 468.0
Yemen 0.127561 0.000416 336.0
Tanzania 0.122804 0.000731 590.0
Madagascar 0.119000 0.000343 277.0
Albania 0.116817 5.70E-05 46.0
Nepal 0.110850 0.000465 375.0
Angola 0.104495 0.000260 210.0
Togo 0.103986 0.000100 81.0
Mali 0.098636 0.000177 143.0
Haiti 0.096490 0.000139 112.0
Papua New Guinea 0.091045 8.55E-05 69.0
Cameroon 0.079211 0.000218 176.0
Belarus 0.074554 0.000113 91.0
Sierra Leone 0.057346 4.96E-05 40.0
Nigeria 0.057224 0.001252 1010.0
Sudan 0.053393 0.000305 246.0
Pakistan 0.041029 0.000989 798.0
Guinea 0.040033 5.58E-05 45.0
(continued)
ARRIVAL
Myanmar 0.038736 0.000288 232.0
Niger 0.038039 7.81E-05 63.0
India 0.028675 0.004857 3919.0
Ethiopia 0.024184 0.000281 227.0
Chad 0.022892 3.59E-05 29.0
Turkmenistan 0.019884 1.49E-05 12.0
Bangladesh 0.010868 0.000258 208.0
Afghanistan NA NA NA
American Samoa NA NA NA
Antigua NA NA NA
Brunei NA NA NA
Cent. Afr. Rep. NA 1.49E-05 12.0
Coted’Ivoire NA NA NA
Dominican Rep. NA 0.004575 3691.0
Gabon NA NA NA
Iran NA NA NA
Iraq NA NA NA
KoreaNorth NA NA NA
Kuwait NA NA NA
Libya NA NA NA
Mauritania NA NA NA
Oman NA NA NA
Portugal NA NA NA
Rwanda NA NA NA
Somalia NA NA NA
Sweden NA NA NA
Tajikistan NA NA NA
Ukraine NA NA NA
Uzbekistan NA NA NA
Vietnam NA 0.004298 3468.0
Source: UN World Tourism Organisation, Madrid and the World Bank, Washington D.C.
428
Table A2. Granger causality test for relationship between IPP and TOURSH.
H0 Sample Obs F-statistic

TOURSHpm does not Granger Cause IPP Full 2491 10.72***
IPP does not Granger Cause TOURSH1000 Full 2491 1.95
TOURSHpm does not Granger Cause IPP Developing Africa 615 3.67**
IPP does not Granger Cause TOURSH1000 Developing Africa 615 0.69
TOURSHpm does not Granger Cause IPP Developing Americas 531 1,41
IPP does not Granger Cause TOURSH1000 Developing Americas 531 0.78
TOURSHpm does not Granger Cause IPP Developing Asia 381 0.11
IPP does not Granger Cause TOURSH1000 Developing Asia 381 1.08
TOURSHpm does not Granger Cause IPP OECD countries 461 1.62
IPP does not Granger Cause TOURSH1000 OECD countries 461 3.51**
TOURSHpm does not Granger Cause IPP European transition countries 247 2.38*
IPP does not Granger Cause TOURSH1000 European transition countries 247 0.29
TOURSHpm does not Granger Cause IPP Developing Middle East 256 0.21
IPP does not Granger Cause TOURSH1000 Developing Middle East 256 0.27
Table A3. Pearson correlation coefficients.

LINNET LROOM
ARRIVALS COMMIT LGDPCAP pmcap LINNET ISLAND OPEN POP POPSH IPP PRICE PRICEWB RECEIPTS RECEIPTSWB LROOMS Spmcap UNSAFE TOURSHpm TOURSHPOPSH
ARRIVALS 1.000000 0.257155 0.411852 0.339240 0.281589 70.182834 70.118415 0.250947 0.241418 70.294089 70.017902 70.025996 0.853524 0.791930 0.586801 0.242470 70.247783 0.963371 0.064427
COMMIT 0.257155 1.000000 0.313823 0.182789 0.148809 70.347685 70.084989 0.062438 0.062785 70.235824 0.012638 0.044087 0.267359 0.277683 0.415187 0.020992 70.253417 0.264594 70.119805
Log GDPCAP 0.411852 0.313823 1.000000 0.313076 0.454671 0.035630 0.282085 70.077225 70.082802 70.494430 0.154091 0.172477 0.393358 0.378137 0.529642 0.758569 70.493548 0.410456 0.417061
Log (INNETpmcap) 0.339240 0.182789 0.313076 1.000000 0.856584 70.110255 0.070099 0.121597 0.092308 70.049781 0.069414 0.077729 0.355640 0.410185 0.453095 0.193570 70.255093 0.247669 70.015641
Log (INNET) 0.281589 0.148809 0.454671 0.856584 1.000000 0.023849 0.205596 0.005561 70.014351 70.221987 0.093107 0.143465 0.316647 0.311878 0.344487 0.409621 70.337068 0.185975 0.150489
ISLAND 70.182834 70.347685 0.035630 70.110255 0.023849 1.000000 0.293295 70.134890 70.135548 70.171256 0.049227 0.046235 70.155708 70.149156 70.314621 0.456056 70.232444 70.182764 0.415970
OPEN 70.118415 70.084989 0.282085 0.070099 0.205596 0.293295 1.000000 70.213726 70.219533 70.074968 0.027460 70.024530 70.122811 70.122915 70.214202 0.334879 70.122897 70.141448 0.373886
POP 0.250947 0.062438 70.077225 0.121597 0.005561 70.134890 70.213726 1.000000 0.994076 0.064663 0.010247 0.003397 0.241742 0.260989 0.301065 70.171908 0.047533 0.228788 70.099112
POPSH 0.241418 0.062785 70.082802 0.092308 70.014351 70.135548 70.219533 0.994076 1.000000 0.057434 0.009426 0.002632 0.230679 0.257891 0.297402 70.174213 0.048179 0.226027 70.099760
IPP 70.294089 70.235824 70.494430 70.049781 70.221987 70.171256 70.074968 0.064663 0.057434 1.000000 70.109141 70.122877 70.312088 70.323027 70.269585 70.601765 0.415185 70.306021 70.292251
PRICE 70.017902 0.012638 0.154091 0.069414 0.093107 0.049227 0.027460 0.010247 0.009426 70.109141 1.000000 0.949835 0.046197 0.065832 0.060446 0.176786 70.051322 70.024273 0.041238
PRICEWB 70.025996 0.044087 0.172477 0.077729 0.143465 0.046235 70.024530 0.003397 0.002632 70.122877 0.949835 1.000000 0.085638 0.105681 0.022874 0.121992 70.074352 70.027036 0.018607
RECEIPTS 0.853524 0.267359 0.393358 0.355640 0.316647 70.155708 70.122811 0.241742 0.230679 70.312088 0.046197 0.085638 1.000000 0.987659 0.574279 0.268946 70.253332 0.794466 0.036628
RECEIPTSWB 0.791930 0.277683 0.378137 0.410185 0.311878 70.149156 70.122915 0.260989 0.257891 70.323027 0.065832 0.105681 0.987659 1.000000 0.570625 0.247790 70.226903 0.784217 0.022124
Log (ROOMS) 0.586801 0.415187 0.529642 0.453095 0.344487 70.314621 70.214202 0.301065 0.297402 70.269585 0.060446 0.022874 0.574279 0.570625 1.000000 0.299049 70.258294 0.582241 0.002974
Log (ROOMSpmcap) 0.242470 0.020992 0.758569 0.193570 0.409621 0.456056 0.334879 70.171908 70.174213 70.601765 0.176786 0.121992 0.268946 0.247790 0.299049 1.000000 70.543831 0.246244 0.640653
UNSAFE 70.247783 70.253417 70.493548 70.255093 70.337068 70.232444 70.122897 0.047533 0.048179 0.415185 70.051322 70.074352 70.253332 70.226903 70.258294 70.543831 1.000000 70.254906 70.287211
TOURSHpm 0.963371 0.264594 0.410456 0.247669 0.185975 70.182764 70.141448 0.228788 0.226027 70.306021 70.024273 70.027036 0.794466 0.784217 0.582241 0.246244 70.254906 1.000000 0.068315
TOURSHPOPSH 0.064427 70.119805 0.417061 70.015641 0.150489 0.415970 0.373886 70.099112 70.099760 70.292251 0.041238 0.018607 0.036628 0.022124 0.002974 0.640653 70.287211 0.068315 1.000000

The Journal of International Trade & Economic Development: An International and Comparative Review

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This article was downloaded by: [Monash University Library]

On: 17 July 2013, At: 23:34

The Journal of International

Trade in tourism services:

To link to this article: http://dx.doi.org/10.1080/09638199.2011.574723

PLEASE SCROLL DOWN FOR ARTICLE

Trade in tourism services: Explaining tourism trade and the

The article addresses two questions related with tourism as a service

JEL Classiﬁcations: F10; F12; F14; L83

*Corresponding author. Email: camilla.jensen@nottingham.edu.my

© 2013 Taylor & Francis

as entertainment and culture industries, new technologies, public and

Firstly, by taking a comparative development perspective on the factors that

ARRIVALit Number of tourist arrivals including all international arrivals no

by the income per capita as calculated by the World Bank in

XSi ¼ a0 þ b0 Pi� þ gn Vi þ ei ð1Þ

TOURSHpmit ¼ ai þ b0 IPP þ Pit þ g1 LogðGDPCAPÞit þ g2 LogðROOMSÞit

Or estimated using ﬁrst diﬀerencing with a lagged dependent variable

DTOURSHpmit ¼ a0 TOURSHpmit�1 þ b0 DIPPitþ � g1 DLogðGDPCAPÞit

5.1. Results for the full sample

Table 3. Panel data results, comparative advantage.

(79.99) (79.59) (79.92) (79.98) (78.18)

The main diﬀerence between columns 1–5 in Tables 2 and 3 concern in

Figure 1. Mean market shares and internet users 1982–2006.

5.2. Results for the income sub-samples

Table 4. Panel data results, absolute advantage by income groupings.

(72.67) (70.42) (71.06) (70.49)

6. Gains from GATS in tourism

6.2. Analysis of changes in tourism receipts over time

DReceipt ¼ DPrice � Arrival þ DArrival � Price þ DPrice � DArrival ð2aÞ

The interaction eﬀect is typically quite small. Focusing on the main

DReceipt DPrice DArrival

6.3. Results of the receipts analysis

Table 5. Number of countries by commitment level.

Commitment level No. of countries (hereof islands)

Table 6. Are there gains from liberalisation of services trade in tourism?

(2.72) (3.18) (0.76) (0.90) (3.15) (3.64)

7. Discussion and conclusion

survey. Open Economies Review 8, no. 3: 285–308.

Table A1. Comparison of dependent variables in 2005.

Denmark 6.948669 0.005824 4699.0

Panama 1.739826 0.000870 702.0

China 0.287381 0.058018 46809.0

H0 Sample Obs F-statistic

Table A3. Pearson correlation coeﬃcients.

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