The Economics of Small Island Tourism

The Economics of Small Island Tourism

International Demand and Country Risk Analysis

The Fondazione Eni Enrico Mattei series on Economics, the Environment and Sustainable Development

Riaz Shareef, Suheija Hoti and Michael McAleer

This study forms an entirely new area of research on Small Island Tourism Economies (SITEs). It addresses the importance of uncertainty in monthly international tourist arrivals and country risk indicators to the macroeconomy.

Chapter 3: A Survey of Empirical Analysis in Tourism Demand

Riaz Shareef, Suheija Hoti and Michael McAleer

Subjects: development studies, tourism, economics and finance, environmental economics, environment, environmental economics, tourism, geography, tourism

Extract

3.1 INTRODUCTION Tourism forms part of international trade and is considered to be an invisible export. Therefore, a natural starting point for analysing tourism demand would be to consult the international trade literature. Among many different kinds of international trade, the most closely linked to this analysis would be trade in financial services. In 1999, the trade in services accounted for nearly 20 per cent of the value of all international trade, but there has been little research conducted on this topic. The next strand of literature is research in empirical tourism, on which a large proportion of this monograph is focused. The international trade literature exposes aspects that make it unattractive for incorporating international tourism. The most extensively used theory in international trade is the Heckscher-Ohlin theory, which explains that international trade flows are mainly based on relative factor endowments. This theory can only be applied when factors of production can be sensibly approximated by, for instance, capital and labour. In tourism, the most important factors of production are unique and virtually impossible to quantify. For example, how is it possible to measure the worth of the Taj Mahal, in Agra, India, a natural wonder such as the Grand Canyon in Colorado, USA, the Niagara Falls in Canada and the USA, the undersea world of the Maldives in the Indian Ocean, and the Great Barrier Reef in Australia, all of which are among countless significant international tourist attractions? In this regard, one can argue that it is not theoretically...

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