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2007 Annual International CHRIE Conference & Exposition
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Second, Kim et al. (2006) argued that the world demand for tourism would have a favorable impact on the
long-run growth of a small economy. They used per capita GDP and population to measure the size (big or small) of
an economy, and concluded that Taiwan exhibits the tourism-led economic growth because of its relatively smaller
economy than Korea. To check if their explanation is reasonable, we summarize annual data of per capita GDP,
population and GDP from 2002 to 2004 for all four countries in Table 2. Given that the tourism-led economic
growth exists only in Singapore and Taiwan, it seems to be more appropriate to measure the size of economy in
terms of population and GDP, but not in terms of per capita GDP since per capita GDP in China and Korea is less
than in Singapore and Taiwan. In addition, we speculate that the degree of dependence of economic development on
tourism may be another possible answer to whether tourism development can lift economic growth. According to the
previous studies, Oh (2005) stated that value-added revenue derived from tourism-related activities accounts for 3.5
percent of South Korea’s GDP, and Kim et al. (2006) reported that tourism receipts accounted for 4.2 percent of the
Taiwanese GDP in 1996. The empirical findings that the tourism-led economic growth was found in Taiwan but not
in Korea may be due to the Taiwan’s higher degree of dependence of economic development on tourism. To further
validate our conjecture, we compute the corresponding percentage of tourism receipts accounting for the national
GDP in China and Singapore. Over a ten-year period from 1990 to 2000, we discover that tourism receipts
accounted for about 0.6% of the Chinese GDP in 1990 and 1.4% in 2000 with an average rate of 1.1%. In
comparison, the ratio of tourism receipts to GDP in Singapore is about 10.7% in 1990, 12.5% in 1991, 12.2% in
1992, 6.6% in 2000 and the average ratio for the ten-year period is 9.2%. Given the above demonstration, Singapore,
compared to China, apparently exhibits a much higher dependence of economic development on tourism. This
finding may explain why the existence of the tourism-led economic growth in Singapore, but not in China.
Tests results also support Copeland’s (1991) argument that exchange rates can act as an important factor in
the contribution of tourism expansion to economic development in a small open economy, and are in line with
finding in Dritsakis (2004) that foreign exchange rate can influence economic growth and tourism expansion.
Specifically, we find that foreign exchange rate can contribute to both economic and tourism growth in a small open
economy, like Korea. In another small open economy, such as Taiwan, changes in the foreign exchange rate can also
cause tourism expansion. Foreign exchange rate plays an important factor of export development in China,
Singapore and Korea as well. On the other hand, Shan and Wilson (2001) declared that the causal relationship
between trade and tourism could run in either or both directions and detected a two-way causality between trade and
tourism growth in China. Our study outcomes reveal a one-way causal link between exports and tourism when
another two factors, economic activity and exchange rate, are incorporated into the investigation. A unidirectional
causality running from export growth to tourism development is found not only in China, but also in Singapore,
Korea and Taiwan. In other words, advances in exports can promote tourism development in all four countries.
However, tourism expansion can reinforce export growth only in Korea. Indeed, the export-led tourism growth
hypothesis is the only one identified in all four Asian tourist destinations. Compared with the mixed results
regarding the economy-led tourism development and the tourism-led economic growth in different countries, the
support of the export-led tourism growth in all four Asian tourist destinations is considered as the most consistent
and promising finding in this study.
Lastly, we evaluate the impact of some tourism-related mega events, which were reported to significantly
damage the hospitality and tourism industry in the East Asia, on the four variables based on the VAR or VECM
framework when running the multivariate Granger causality tests. For the case of China, the SARS outbreak in 2003
did not only harm the hotel industry (Chen, 2006), but also hurt the tourism expansion. While the SARS outbreak in
2003, the 911 terrorist attacks in the U.S., the Asian financial crisis and the 921 earthquake were reported to inflict
severe damage on the Taiwanese hotel and tourism industry (Chen et al., 2005; Chen et al., 2006), the SARS
outbreak and the 921 earthquake also deteriorated the tourism development on the island country. It is also observed
that the Asian financial crisis considerably increased the export growth in Korea and depreciated the national
currency in Singapore. Furthermore, the 911 terrorist attacks in the U.S. also initiated a negative impact on the
growth of foreign tourist arrivals to Asian tourist destinations, but the destructive influence was not statistically
significant.
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