Testing Alternative Dynamic Systems for Modelling Tourism Demand

Abstract

This paper presents an empirical study of tourism demand dynamics and identifies areas in which the scrutiny of relationships between theoretical and empirical considerations is likely to produce new insights. A flexible general form of a Dynamic Almost Ideal Demand System (DAIDS) is derived to analyse UK tourism demand for the neighbouring destinations of Portugal, Spain and France during 1969–97. Nested within the general dynamic structure are Deaton and Muellbauer's static AIDS model itself, the partial adjustment model and the auto-regressive distributed lag model, which are tested against the general dynamic alternative. The empirical results obtained show that DAIDS is a data-coherent and theoretically consistent model, providing evidence of the robustness of this methodology for tourism demand analysis in a temporal context. Moreover, the dynamic model offers statistically strong evidence of the inadequacy of the orthodox static AIDS and other restricted models for the consistent reconciliation of data and theory within their formulations. Estimates for tourism price and expenditure elasticities are obtained, permitting a comparative analysis of the relative magnitudes and statistical relevance of the long-run and short-run sensitivity of UK tourism demand to changes in its determinants.

Keywords

tourism demand dynamic almost ideal system partial adjustment system auto-regressive distributed lag system

Get full access to this article

View all access options for this article.

References

Anderson

Blundell

(1983), ‘Testing restrictions in a flexible dynamic demand system: An application to consumers' expenditure in Canada’, Review of Economic Studies, Vol 50, No 3, pp 397–410.

Anderson

Blundell

(1984), ‘Consumer non-durables in the UK: A dynamic demand system’, Economic Journal, Vol 94, No 376a, pp 35–44.

De Mello

(2001), Theoretical and Empirical Issues in Tourism Demand Analysis, PhD thesis, University of Nottingham, Nottingham.

De Mello

Nell

(2005), ‘The forecasting ability of a cointegrated VAR system of the UK tourism demand for France, Spain and Portugal’, Empirical Economics, Vol 30, pp 379–392.

De Mello

Sinclair

M. T.

(2000a), ‘Alternative specifications of tourism demand models’, paper presented at the ESRC Development Economics Study Group Annual Conference, Nottingham, 27–29 March.

De Mello

Sinclair

M. T.

(2000b), ‘Alternative specifications of tourism demand models’, paper presented at 5th Conference of the Portuguese Association for Research in Economics, Porto, 13–15 June.

De Mello

Pack

Sinclair

M. T.

(2002), ‘A system of equations model of UK tourism demand in neighbouring countries’, Applied Economics, Vol 34, No4, pp 509–521.

Deaton

Muellbauer

(1980a), ‘An almost ideal demand system’, American Economic Review, Vol 70, No 3, pp 312–326.

Deaton

Muellbauer

(1980b), Economics and Consumer Behavior, Cambridge University Press, Cambridge.

10.

Durbarry

Sinclair

M. T.

(2003), ‘Market shares analysis: The case of French tourism demand’, Annals of Tourism Research, Vol 30, No 4, pp 927–941.

11.

Hendry

D. F.

Richard

J.-F.

(1983), ‘The econometric analysis of economic time series’, International Statistical Review, Vol 51, pp 111–163.

12.

Song

Witt

S. F.

(2004), ‘Modeling tourism demand: A dynamic linear AIDS approach’, Journal of Travel Research, Vol 43, No 2, pp 141–150.

13.

Lyssiotou

(2000), ‘Dynamic analysis of British demand for tourism abroad’, Empirical Economics, Vol 25, No 3, pp 421–436.

14.

O'Hagan

J. W.

Harrison

M. J.

(1984), ‘Market shares of US tourist expenditure in Europe: An econometric analysis’, Applied Economics, Vol 16, No 6, pp 919–931.

15.

Papatheodorou

(1999), ‘The demand for international tourism in the Mediterranean region’, Applied Economics, Vol 31, No 5, pp 619–630.

16.

Song

Witt

S. F.

Jensen

T. C.

(2003), ‘Tourism forecasting: Accuracy of alternative econometric models’, International Journal of Forecasting, Vol 19, No 1, pp 123–141.

17.

Syriopoulos

T. C.

Sinclair

M. T.

(1993), ‘An econometric study of tourism demand: The AIDS model of US and European tourism in Mediterranean countries’, Applied Economics, Vol 25, No 12, pp 1541–1552.

18.

White

K. J.

(1985), ‘An international travel demand model: US travel to Western Europe’, Annals of Tourism Research, Vol 12, No 4, pp 529–545.

19.

Witt

S. F.

Song

Louvieris

(2003), ‘Statistical testing in forecasting model selection’, Journal of Travel Research, Vol 42, No 2, pp 151–158.