Are State Expenditures to Promote Tourism Effective?

Abstract

Our focus is the effect of public spending to promote tourism on tourism growth and broader economic growth among U.S. states. We estimate a series of regression models using a panel of state-level data for the years 1985 through 2003 to identify the effect of public tourism promotion spending (TPS) on state tourism growth, gross state product growth, and state employment growth, when such spending is financed through own-source revenues. Results indicate that the effect of higher TPS on tourism or employment growth depends on the existing level of tourism expenditures in the state. More specifically, results indicate that additional TPS increases tourism and employment growth for states that have low levels of initial tourism expenditures. However, that effect diminishes as initial levels of tourism expenditures increase. For states with very high initial levels of tourism expenditures, employment can decline following increased TPS funded through own-source revenues.