Tourism and Growth Nexus in the Eu

This paper investigates the heterogeneous effects of tourism on economic growth within the European Union from 2000 to 2019. We employ a panel quantile regression approach to analyse how tourism’s impact varies across countries at different levels of economic development. This methodology, unlike traditional regression techniques, accounts for unobserved heterogeneity and is robust to outliers, making it particularly suitable for the diverse economic landscape of the EU. Our findings confirm the tourism-led growth hypothesis, providing evidence that tourism makes a significant contribution to economic growth, particularly in lower-growth economies. This suggests that tourism serves as a crucial “catch-up” driver, stimulating growth in countries where other economic alternatives may be scarce. Moreover, the obtained results are robust even when controlling for potential endogeneity by using a measure of GDP net of tourism. While our analysis supports the importance of physical capital and a negative effect of corruption, the impact of tourism is found to be most pronounced at lower quantiles of the growth distribution, highlighting its strategic importance for Southern and peripheral European countries seeking to boost economic prosperity.