The impacts of immigrants and institutions on bilateral tourism flows

In this paper, we use data on recent bilateral tourism flow from 34 Organisation for Economic Co-operation and Development (OECD) countries to 52 middle-to low-income countries for the period 1995-2010 to determine whether immigration, trade and institutional quality play a role in driving OECD nationals to visit immigrant-source countries. Except for the African countries, the results show that immigrants residing in OECD countries have a positive advertising effect for their home country, inducing tourism flows from OECD countries. We also find that the quality of institutions, along with freedom and civil liberty indices, are important in selecting tourism destinations. A massive 8% of the variation in tourism flows can be accounted for by these factors. These results hold for the subsample and the whole sample with two exceptions: European and African destinations. We posit that this feature of the data exists because European (African) countries are so similar to each other, and small differences in the indexes do not matter at the top (bottom) of the distribution. By controlling for gravity and macroeconomic stability variables, we also show that the trade flows between countries, among other factors, play a crucial and stable role on tourism flows. Dynamic panel data estimation is used to account for the influence of repeat visits and support our findings.