| Abstract: |
This study develops an open-economy Schumpeterian growth model with endogenous
takeoff to explore how tourism affects the transition of an economy from
stagnation to growth. Suppose leisure preference is strong. Then, an expansion
in tourism triggers an earlier takeoff and raises the transitional growth rate
when tourism reliance is low, but delays takeoff and lowers the transitional
growth rate when tourism reliance is high. We use cross-country panel data and
find that tourism has an inverted-U effect on economic growth, consistent with
our theoretical prediction. We also calibrate the model to data in Macau and
find that the growth-maximizing size of the tourism-related sector is about
60% of GDP. |