Tourism, takeoff and growth: A quantitative analysis of Macau

Angus Chu and Rongxin Xu

MPRA Paper from University Library of Munich, Germany

Abstract: This study develops an open-economy Schumpeterian growth model with endogenous takeoff to explore how tourism affects the transition of an economy from stagnation to growth. Suppose leisure preference is strong. Then, an expansion in tourism triggers an earlier takeoff and raises the transitional growth rate when tourism reliance is low, but delays takeoff and lowers the transitional growth rate when tourism reliance is high. We use cross-country panel data and find that tourism has an inverted-U effect on economic growth, consistent with our theoretical prediction. We also calibrate the model to data in Macau and find that the growth-maximizing size of the tourism-related sector is about 60% of GDP.

Keywords: tourism; endogenous takeoff; innovation (search for similar items in EconPapers)
JEL-codes: O3 O4 Z0 (search for similar items in EconPapers)
Date: 2026-01
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:127890

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