Abstract:

This paper explores the dynamic relationship between economic freedom and tourism industry. In addition, the impact of economic growth is controlled in the extended model. Balanced panel data are collected for 100 countries over the period 2002-2015. The methodology includes panel data econometrics. Therefore, models are initially estimated using fixed and random effects models. Moreover, models are estimated using linear dynamic panel data estimators based on GMM framework. The results of linear static panel data estimators indicate a significant positive impact of economic freedom on tourism in both, initial and extended model. Stronger impact is reported in initial model. Dynamic panel data models confirm these results with the stronger impact reported in extended model. Given the importance of tourism industry, this paper suggests that governments should do necessary changes to foster the economic freedom since it is found to be an important factor to attract the foreign tourists.  

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