Tourism and Long‐run Economic Growth in Aruba

Abstract

ABSTRACT This study examines the long‐run relationship between tourism development and economic growth in a small island destination. Determining whether the nature of the relationship is unidirectional or bidirectional provides insightful information as to policies to be implemented. This information is crucial in a resource‐poor environment, such as a small island destination. The study employs an econometric methodology consisting of unit root testing, co‐integration analysis, vector error correction modeling and Granger causality testing. Results confirm the reciprocal hypothesis. The policy implication is that resource allocation supporting both the tourism and tourism‐related industries could benefit both tourism development and economic growth. Copyright © 2013 John Wiley & Sons, Ltd.