Tourism expansion and economic development: Evidence from the United States and China

Abstract

The United States has been the largest economy in the world since 1871, but its position is currently threatened by China. Both countries play important roles in the global hospitality and tourism industry, and China and the United States, specifically, represent a classic comparison of Eastern and Western economies and cultures. This study examines and compares the causal relationships between tourism expansion and economic development in the two countries. We augment the existing literature by using quarterly instead of annual data and taking potential structural breaks into account. The interesting outcome of this study is that both the United States and China exhibit economic-driven tourism expansion, but neither of them support the conventional view of tourism-led growth. There is no long-term equilibrium relationship between tourism expansion and economic development in the United States, while one exists in China. Study conclusions are strengthened by testing the sensitivity of the Granger causality test to different lag selections.