Research Note: Revenue and Labour Demand in the Hotel Industry: An Investigation of Endogeneity

Chiang-Ming Chen, Yu-Chen Lin and Yu-Hsun Liao
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Chiang-Ming Chen: Department of Economics, National Chi Nan University, 1 University Road, Puli, Nantou 54561, Taiwan
Yu-Chen Lin: Department of Economics, Soochow University, Taipei, Taiwan
Yu-Hsun Liao: Department of Economics, National Chi Nan University, Taiwan

Tourism Economics, 2014, vol. 20, issue 2, 439-446

Abstract: This paper investigates the effect of hotel room revenue on labour demand based on data for international tourist hotels in Taiwan. Past empirical research on the relationship between hotel room revenue and labour demand has failed to take into account the fact that the causality between these two variables can be a two-way rather than just a one-way relationship. In other words, room revenue can affect labour demand and vice versa . The authors address this issue by using an instrumental variables (IV) regression approach in which room revenue and hotel labour demand can be determined simultaneously. The empirical results indicate that a failure to account for the two-way causality will underestimate the effect of room revenue on labour demand. The findings are of particular importance to hotel managers as the authors provide more accurate estimates for the relationship between hotel room revenue and labour demand.

Keywords: room revenue; labour demand; hotel; endogeneity (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:sae:toueco:v:20:y:2014:i:2:p:439-446

DOI: 10.5367/te.2013.0279

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