The Impact of Tourism on Economic Growth: An Empirical Analysis of the Tourism-Led Growth Hypothesis in Zambia

Abstract

This study investigates the role of tourism in economic growth, addresses inconsistencies in the Tourism-Led Growth Hypothesis (TLGH), and explores its interaction with travel services. We used the Vector Error Correction model with annual time series data from 1986 to 2022 to test the TLGH in Zambia. In the short run, the tourism variables show no statistically significant effect on economic growth. However, the speed of adjustment proved to be statistically significant in the short run, suggesting that short-term variables exhibit a contemporaneous relationship in the long run and converge to the long-run equilibrium. Hence, in the long run, tourist arrivals and receipts positively impact growth, whereas tourism expenditure and interaction with travel services have negative effects. Granger causality results align with TLGH for tourist arrivals but challenge it for tourism expenditure and receipts. Recommendations include strategic measures to enhance tourist arrivals, address expenditure impacts, and optimize revenue streams from tourism.

Keywords: Economic growth, tourism, hypothesis, causality, travel services

JEL Classification: O40; O47; Z30

DOI: 10.7176/JESD/16-4-08

Publication date: June 30th 2025