The Impact of Wage Rate Growth on Tourism Competitiveness

Abstract

This study tests whether national labour costs affect international competitiveness in the tourism industry. Using a fixed effect model design and two-stage least squares (2SLS) estimation, a set of 40 countries is examined during the period 1990–2010. The study reveals that labour costs may be an important supply-side determinant of tourism expenditures, and supports the hypothesis of a negative relationship between these two variables. Implications of the reported findings for industry and for government macroeconomic policy are provided. Potential extensions of these findings to the tourism area life cycle model are also discussed.