Effects of tourism on regional asymmetries: Empirical evidence for Portugal

• We estimate tourism regional effects on output, employment and investment.
• The methodology considers the existence of direct effects and regional spillovers.
• Benefits from tourism are not equally distributed among regions.
• Some regions benefit more from tourism in other regions.
• Tourism in each region generates different effects at national level.

This study uses a vector autoregressive approach to estimate the regional effects of tourism in Portugal with the ultimate objective of assessing tourism's role in reducing regional asymmetries. We identify the locations where tourism generates higher effects for each region, as well as the regions where tourism generates the strongest effects on the country's economic performance. This issue is of particular interest from the side of the country's authorities since tourism is a strategic sector to promote national and regional convergence. The study's findings suggest that tourism has contributed to the concentration of economic activity in the largest region of the country and to reduce the gap between the second and the third largest regions. Some regions benefit more from tourism located in other regions than tourism located in each region and tourism in all regions generate positive effects on the country's economic performance.