Revisiting the Tourism-Led Growth Hypothesis: Demand–Supply Dynamics, Heterogeneity and Causality in a Global Panel

Whether tourism contributes to economic growth through demand-side or supply-side mechanisms remains an open question in the literature on the Tourism-Led Growth Hypothesis. Using a panel of 84 countries over the period 1995–2018, this study examines the tourism–growth relationship by applying panel cointegration techniques to two tourism demand indicators and one tourism supply indicator. By distinguishing between OECD and non-OECD economies, the analysis explicitly accounts for cross-country heterogeneity while capturing both short- and long-run dynamics. The results reveal robust evidence of cointegration, with important differences across time horizons and country groups. In particular, supply-side factors play a more prominent role in non-OECD economies, especially in the short run, whereas demand-side variables are more relevant in OECD countries. Panel Granger causality results further indicate bidirectional relationships between tourism and economic growth, consistent with the presence of mutually reinforcing dynamics between tourism development and economic performance.