The linear and non-linear relationship between of tourism demand and output per worker: A study of Sri Lanka

Linear and non-linear long-run association between tourism and economic growth is examined using the autoregressive distributed lag procedure with Sri Lanka as a reference country over the sample period 1978-2014. Linear estimation results indicate that a 1% increase in tourism receipts result in an increase in the output per worker by 0.10% in the long run. The net effect in the short run is marginally negative and generally mixed. Non-linear relationship explains the effectiveness of the tourism industry depends strongly on public infrastructure which is subject to congestion like the public transport, airports, road system or telecommunications. A long-run U-shape relationship is detected with the minimum necessary tourism receipts of 1.26% of GDP. The causality results indicate that higher tourism receipts causes growth. The method applied here can be used to examine other countries in the similar domain.