The role of tourism in service sector employment: Do market capital, financial development and trade also play a role?

Abstract

Workers’ living standards have recently deteriorated in the service sector throughout the world, although a few decades ago, service was among the fastest growing sectors in industrialised nations. However, in recent years, in service sectors tourism especially has been drying up. This paper examines the symmetric and asymmetric effects of tourism, market capital, financial development, and trade on service sector employment in Australia from the period 1991–2019. The results of the cointegration tests, notably the ARDL and NARDL bound tests, reveal that the variables are related in the long run. The positive effect of tourist arrival on service sector employment in Australia is confirmed by long-run estimates from both ARDL and NARDL approaches. Similarly, both approaches also confirm the long-run positive relation of financial development. However, while ARDL shows long-run negative and positive associations of market capital and trade, respectively, the opposite is found in the case of the NARDL approach. As a result, policy proposals like planning and initiating tools for ensuring consistent international arrivals and easing of entry requirements have been recommended by this study to assist Australia in enhancing service sector employment, thus promoting economic development.