The tourism–economy causality in the United States: A sub-industry
Chun-Hung (Hugo) Tang
, SooCheong (Shawn) Jang
School of Hotel and Restaurant Administration, Oklahoma State University, 210 HESW, Stillwater, OK 74078, USA
Department of Hospitality and Tourism Management, Purdue University, 700 W. State Street, West Lafayette, IN 47907-2059, USA
Received 24 November 2007
Accepted 21 September 2008
This study analyzes the relationships between the performance of four tourism related industries
(airlines, casinos, hotels, and restaurants) and GDP in the U.S., using cointegration and Granger causality
tests. The results show no cointegration between economic growth and industry performance in the U.S.
This suggests that mechanisms to increase the revenue of tourism related industries can potentially be
successful in the long-run, even in the face of sustained economic stagnation. The results also indicate
a temporal causal hierarchy among industry performance, which could be a good tool for timing and
prioritizing the allocation of resources among industries to ensure better overall tourism and economic
outcomes. Investors and managers could also use this temporal hierarchy to identify the best timing for
investments and business strategies by observing performance trends of industries higher on the
Ó 2008 Elsevier Ltd. All rights reserved.
Because of the potential economic beneﬁts of tourism, such as
increases in foreign exchange earnings, income, employment and
taxes (Archer, 1995; Balaguer & Cantavella-Jorda, 2002; Dritsakis,
2004; Durbarry, 2002), many governments have engaged in
tourism development for the purpose of promoting economic
growth (Mill & Morrison, 2002; Sahli & Nowak, 2007). However,
empirical studies have shown inconsistent or even contradictory
results regarding the tourism-led economic growth hypothesis. For
example, Dritsakis (2004) found a bi-directional causal relationship
in Greece; Kim, Chen and Jang (2006) reported a bi-directional
causality in Taiwan; and Oh (2005) discovered economy-driven
tourism growth in Korea.
Considering that these empirical studies are based upon
different countries, the inconsistent results may be a reﬂection of
the country effect. Because countries could be different in terms of
the weight of tourism in the overall economy (Oh, 2005), the size
and openness of the economy (Kim et al., 2006), and the production
capacity constraints (Dwyer, Forsyth, Madden, & Spurr, 2000), the
tourism–economy relationship could also differ from one country
to another. Costello (1993) also concluded that a substantial
fraction of changes in annual productivity could be attributed to
nation-speciﬁc factors. The diverse relationships between tourism
growth and economic development in different country settings
(Balaguer & Cantavella-Jorda, 2002; Dritsakis, 2004; Kim et al.,
2006; Oh, 2005) found in existing empirical studies further support
the inﬂuence of country effect.
The U.S. tourism industries are among the largest employers in
the country and generate the largest tourism receipts in the world
(World Tourism Organization, 2006). Tourism has created more
than 7.5 million jobs and generates $104.9 billion in taxes (Amer-
ican Hotel & Lodging Association, 2006). Nevertheless, little effort
has been made to investigate the relationship between tourism and
economy in the U.S. Investigating the tourism–economy relation-
ship in the U.S. would not only improve the understanding of the
interaction between tourism industries and the economy in the U.S.
but would also provide an opportunity for examining the tourism–
economy relationship in the context of a developed economy.
The inconsistent results among extant literature may also come
from treating all tourism related businesses as a homogeneous
industry. Unlike other industries that consist of ﬁrms offering
similar goods and services, the tourism industry is more of
a ‘system’ (Mill & Morrison, 2002) that incorporates a variety of
different types of businesses and organizations, such as lodging
establishments, airlines, restaurants, and casinos (American Hotel
& Lodging Association, 2006). These tourism businesses may
inﬂuence or respond to the same economic events differently in
terms of timing and magnitude due to the difference in their
offerings, albeit still related to tourism. Schmalensee (1985) also
Corresponding author. Tel.: þ1 405 744 7110; fax: þ1 405 744-6299.
E-mail addresses: email@example.com (C.-H.(Hugo) Tang), jang12@purdue.
edu (SooCheong(Shawn) Jang).
Tel.: þ1 765 496 3610; fax: þ1 765 494 0327.
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Tourism Management 30 (2009) 553–558