Does international travel cause economic growth? Evidence from China's removal of travel restrictions on foreigners

Chang Liu and Li-An Zhou

Economics of Transition and Institutional Change, 2022, vol. 30, issue 2, 337-355

Abstract: International travel has been hypothesized to shape large cross‐country differences in productivity and income. However, evidence supporting this hypothesis, especially from developing countries, remains scarce. This paper fills this gap by studying a novel historical natural experiment—China's removal of travel restrictions on foreigners to designated Open‐to‐Foreigners‐Counties (OFCs). Utilizing the county‐by‐county rollout of the OFCs, we find that removing travel restrictions on foreigners led to a 7.4% increase in per capita industrial output for the OFCs in 1985–1991. The positive effects are larger in counties with more foreign equipment and greater industrial human capital. We highlight the role of person‐based international knowledge diffusion in the economic catch‐up of technology recipient countries.

Date: 2022
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https://doi.org/10.1111/ecot.12294

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Persistent link: https://EconPapers.repec.org/RePEc:wly:ectrin:v:30:y:2022:i:2:p:337-355

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