Tourism Expenditures and Value Added of Economic Sectors: Evidence from Developing Countries

Tourism is a multidisciplinary activity that involves several activities and need various skills, hence, its benefits can spread over to other sectors of the economy. This paper investigates the relationship between tourism expenditures and value added of agricultural, manufacturing and services sectors for developing countries during 1995-2011, using P-VECM and FMOLS methods. The results of Granger causality test in P-VECM framework indicate that there is no short-run causality link between tourism and value added of agricultural and manufacturing sectors, while there is one-way causality link from tourism to value added of services sector. Likewise, in long-run, there is a one-way causality link from tourism to value added of agricultural and manufacturing sectors, while this causality relation is tow-way for services sector. Furthermore, the results of Co-integrated vectors using FMOLS method show that the effect of tourism expenditures on value added of services and manufacturing sectors is positive and significant, while this effect on value added of agriculture sector is negative and significant.