A Study On The Relationship Between EU Tourism Development And Economic Growth

The relationship between tourism development and economic growth has been the focus of the tourism economics, and the correlation and causality between them has caused a lot of theoretical debates in this area. The mainstream view is that tourism has a more significant role in promoting economic growth, but the bulk of the research is mainly focused on tourism development in terms of the scale effect on economic growth. Regarding the structure of tourism industry that helps to expand the scale of tourism and thus resulting in the development economic growth, related discusses are relatively weak. Tourism development level of a country or a region is not only evaluated by its scale, but also by its continuous optimization of industrial structure, and sustainability in terms of quality. In addition, taking into account the heterogeneity of countries, the study should not be confined to a single country or effect and mechanism of regional tourism development on economic growth.Tourism plays a very important role in the economy of the EU countries; its status has been consolidated by the Lisbon Agreement. Although the EU is the most important part of world tourism and one of the most influential regional cooperation organizations, only a few related research studies has been focused on the European Union. In this context, based on the core theoretical framework construction of tourism development "scale-structure-quality", with EU economic and tourism data through the period of 1995-2012, a combination of theory and econometric analysis to explore the relationship between tourism development and economic growth has been applied to this study. Not only tourism of individual countries but also the European Union as a whole has been taken into consideration of this study.Individual Member States joined the European Union for various periods of time, through internal political and social development of all countries, external changes such as financial crises, terrorist attacks, tourism and economic growth in the past 20 years showed a different pattern and rule. Firstly, this study will combine EU tourism and economic development in both events that have significant impacts on the development process and then summarize the interaction study, attempting to portray the European Union as a whole, as well as independent States. In 2004,10 new Member States joined the EU, a high-speed growth in the flow of tourists between old and new Member States has been observed. New Member States’ higher GDP growth rate provided the basis for rapid tourism development, but also created more tourism enterprises to explore new markets and business opportunities. In 2008, a global financial crisis influenced world tourism development as no other events ever did. In this context, this paper focuses on the 2004 EU expansion and the 2008 financial crisis impact as the two major events effecting the European tourism development.Furthermore, after a full analysis on the functions and features of EU tourism administration sector, this paper will analyze EU’s most important policies aiming at enhancing tourism development since 2001, especially the 2010 EU tourism development political framework agreement, and tries to summarize EU’s successful experiences from the administrative perspective, and thus for the reference of Chinese tourism administration sectors to constitute more efficient tourism development policy, in order to promote competitiveness and sustainability of Chinese tourism development. Based on the above theory framework and EU’s practical reality, this paper focuses on the three analyses perspectives and conclusions have been made as following:Firstly, this paper uses the EU as the research object, and divides it into old EU members and new EU members, the former represents the larger tourism scale of developed area, and the latter can be taken as the representative of smaller tourism scale areas. According to the World Tourism Organization, the EU has been further divided into North Europe, South Europe, Western Europe and Eastern Europe respectively for the research. In order to solve the problem of heterogeneity of data between different countries, different panel data analysis methods have been adopted. Heterogeneous Panel Cointegration test results shows there is at least a Cointegration relationship existing between the two variables of GDP and TOUR. This is consistent with previous research conclusions. Next, this paper uses Panel ECM model to explain the relationship between GDP and TOUR, Panel ECM Granger causality test results shows that of all groups the national tourism and economic growth in the short run there is a two-way causal relationship.In the old 15 EU countries in the long term a two-way causal relationship between tourism and economic growth remains, but in the new 12 EU countries only one-way causal relationship of tourism to economic growth has been found. According to the results of the analysis, geographical factors also validate the above conclusions, only southern Europe shows the economic growth of a single causal relationship, the two-way causal relationship are found in all other three areas. The conclusions on EU tourism policy have several implications: for the old 15 EU countries, tourism will naturally benefit from the economic development, and therefore resource allocation doesn’t need to be tilted toward the tourism industry too much. For the new 12 EU countries, if policymakers should tilt to the promotion of tourism development to enhance the whole national economy.Secondly, this paper examines the relationship between EU 27 members’ overall economic development s and the four core tourism industries. The results show that EU economic growth and all tourism industries exist different of causal level relationship:the hotel industry as core industry shows a two-way connection with the aviation industry, the travel agency and the food and beverage industry. The main one-way causal relationship exists between food and beverage industry and other industries; it has limited impact on other industries, but received the effects greater from other sectors. For policymakers, this conclusion can help to make full use of the limited resources at any given time. To further stimulate the development of tourism industry, the hotel industry’s central position and the leading role in other industries should be considered as the basis for policy making. For investors and the industry, and the hierarchical relationships can also help them forecast industry cycle turning points that may exist.Thirdly, in order to examine whether there exists a long-term nonlinear relationship between the tourism development quality and economic growth, this paper applies the tourism specialization degree to represent the tourism development quality, and tries to identify the relationship between the specialization degree and the economic growth. The 27 member states can divided for three a constituency, each constituency of tourism development and economic growth relationship rendering different of situation. Among all the explanatory variables, only capital markets shows a strong positive correlation with economic growth, and other explanatory variables including exchange rates, inflation and so on, do not show correlation. This suggests that during 1995-2012, and the capital market is an important factor affecting economic growth in the EU countries. Then GDP per capita, land area, and the service sector accounts for forest total land area data proportion of GDP are introduced to the further discussion. The empirical results also show among investment in tourism industry、tourism income and economic growth, there exist a high correlation. If investment growth in tourism as independent variables, GDP growth and revenue growth of inbound tourism as the dependent variable, there is a high correlation between the three variables, thus the investment in tourism to boost tourism development and economic growth are very obvious.