The Tourism-led Growth Hypothesis: Empirical Evidence from Colombia

The purpose of this study is to investigate the contribution of tourism to economic growth in Colombia. First, we perform an ex-post analysis and quantify the contribution of the tourism to economic growth from the early 90’s until 2006 by disaggregating growth of real GDP per capita into economic growth generated by tourism and by other industries. Second, we analyze if international tourism is a strategic factor for long-run economic growth for Colombia. This believes that tourism can cause long-run economic growth it is known in the literature as the tourism-led growth hypothesis. The hypothesis is tested empirically by using the cointegration test by Johansen and the Granger Causality test. We find empirical evidence for one cointegrated vector among real GDP per capita, Colombian tourism expenditures and real exchange rates, where the latter two variables are weakly exogenous to the model. The Granger causality test suggests that causality in this model goes from tourism expenditures to real GDP per capita.