Nonlinear nexus between corruption and tourism arrivals: a global analysis

Krambia-Kapardis Maria (), Stylianou Ioanna () and Demetriou Salomi ()
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Krambia-Kapardis Maria: Cyprus University of Technology
Stylianou Ioanna: University of Central Lancashire
Demetriou Salomi: University of Central Lancashire

Empirical Economics, 2022, vol. 63, issue 4, No 12, 1997-2024

Abstract: Abstract The relationship between corruption and tourism has been sporadically examined over the years. According to the existing theory, there is an inverted U relationship which implies that tourism demand initially increases as corruption increases (greasing the wheels) and after a certain threshold level of corruption, tourism demand decreases (sanding the wheels). Empirical studies so far concentrated on capturing the nonlinear relationship, by applying a simple linear model and by including corruption as a quadratic term. In the current paper, the authors revisit the “greasing and sanding the wheels” hypothesis by applying an advanced econometric technique, the threshold regression model, which deals with a key element of model uncertainty, namely parameter heterogeneity. In particular, using a sample of 83 countries from 2001 to 2018, the authors firstly examine if there is a nonlinear relationship between corruption and tourism, and then, they estimate the threshold value of corruption. According to the results, the null hypothesis of a linear model against the alternative of a threshold model with two regimes is strongly rejected. Furthermore, while the effect of corruption on tourism is positive in the low corruption regime and negative in the high corruption regime, a heterogeneous relationship is also found between other politico-socio-economic variables and tourism demand in the low and high corruption regimes.

Keywords: Nonlinearities; Threshold regression; Corruption; Tourism demand (search for similar items in EconPapers)
JEL-codes: C59 D73 L83 Z32 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (1)

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DOI: 10.1007/s00181-021-02193-2

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