ECCB Working Paper - What is Driving Toursim Flows to the ECCU

Table 2 Results from the PPML Estimations

(1)

(2)

(3)

(4)

VARIABLES

Full

w/o SA

w/o EU

Main Markets

Destination Income

0.381***

0.377***

0.360***

0.389***

(0.127)

(0.126)

(0.128)

(0.134)

Source market Income

0.439***

0.434***

0.488***

0.507***

(0.0121) -0.112*** (0.0134) -0.118** (0.0519) -0.220*** (0.0144) -0.0546*** (0.0194) -0.528*** (0.0209) 0.258*** (0.0250) 2.254*** (0.0438) 0.807*** (0.0610) 9.395***

(0.0109) -0.119*** (0.0141) -0.138*** (0.0422) -0.223*** (0.0133) -0.0485*** (0.0178) -0.523*** (0.0214) 0.253*** (0.0268) 2.261*** (0.0388) 0.804*** (0.0615) 9.485***

(0.0148)

(0.0161)

Relative price

-0.0814***

-0.0782*** (0.0174) 0.0904* (0.0477) -0.234*** (0.0153) -0.153*** (0.0198) -0.579*** (0.0294) 0.365*** (0.0331)

(0.0168)

Substitute price

0.0255

(0.0444) -0.222*** (0.0150) -0.118*** (0.0181) -0.570*** (0.0275) 0.332*** (0.0316) 2.070*** (0.0586) 0.872*** (0.0654) 8.571***

Population (J)

Population (I)

Distance

Marketing activity

Common language

Colonial history

0.899*** (0.0659) 10.20***

Constant

(0.466)

(0.411)

(0.407)

(0.393)

Observations

1,020 0.886

969

833

544

R-squared

0.884

0.882

0.856

Source: Model estimates Notes: Estimation method is the Poisson Pseudo Maximum Likelihood estimator. We account for individual and time effects in all specifications. Dependent variable enters as the level of arrivals for all specifications. Robust standard errors in parentheses and *** p<0.01, ** p<0.05, * p<0.1

5.2.1 Economic Size (Income)

The gravity model parameters have signs that are consistent with the literature. Economic mass of

both the origin and destination countries were found to increase the flow of tourists between

countries. So as income increases in both countries, tourism demand is impacted positively. In other

words, the income elasticity of demand is such that a 10.0 per cent increase in source country income

increases the level of arrivals by 4.4 per cent on average. This points to the positive relationship

between income and leisure, increased purchasing power of tourists bodes well for the ECCU. Thus,

when trading partners increase their income the greater their demand for the goods and services

exported by the destination. The coeffcient on the destination income was smaller than that of the

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