The Tourism–FDI Synergy in a Changing South Asia: Fresh Insights from Advanced Panel Modeling

Mohammad Nasir Hossain, Marzia Nomi, Md. Ahsan Habib and Rifat Nahrin
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Mohammad Nasir Hossain: Assistant Professor, Department of Economics, Comilla University, Comilla, Bangladesh.
Marzia Nomi: Assistant Professor, Department of Economics, University of Barishal, Barishal, Bangladesh.
Md. Ahsan Habib: Assistant Professor, Department of Economics, Hajee Mohammad Danesh Science and Technology University, Dinajpur, Bangladesh.
Rifat Nahrin: Assistant Professor, Department of Economics, Comilla University, Comilla, Bangladesh.

International Journal of Science and Business, 2026, vol. 49, issue 1, 42-56

Abstract: The study finds that South Asian economic growth is primarily driven by strong long-run elasticities of labor force participation, foreign direct investment (FDI), and trade openness, with labor exhibiting the highest long-run elasticity. In contrast, the error-correction term is insignificant and positive, indicating an absence of meaningful short-run convergence toward long-run equilibrium. Short-run effects of FDI, labor, and trade are weak and largely insignificant, reflecting structural rigidities and delayed transmission of economic adjustments in the region. Based on these empirical results, the paper argues that long-run growth strategies must prioritize stabilizing FDI inflows, improving the ease of doing business, and strengthening regulatory quality. Given the dominant role of labor in the long run, policies should emphasize improving labor productivity through investment in education, vocational training, skill specialization, and enhanced female labor force participation. Trade-related reforms—such as customs simplification, reduction of non-tariff barriers, expansion of export-oriented zones, and promotion of technology-intensive exports—are also essential. At the same time, the insignificant adjustment term suggests that short-run policy responses need to be faster and more flexible, supported by more efficient financial and institutional systems. Strengthening domestic supplier networks and improving investment absorption capacity are crucial to ensuring that long-run gains from FDI translate into sustained economic development.

Keywords: Tourism; Foreign Direct Investment; Economic Development; Labor Force (search for similar items in EconPapers)
Date: 2026
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Persistent link: https://EconPapers.repec.org/RePEc:aif:journl:v:49:y:2026:i:1:p:42-56

DOI: 10.58970/IJSB.2633

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