High skills, high growth: is tourism an exception?

Despite the emphasis placed by growth models on technological progress, recent empirical evidence shows that tourism, a sector widely regarded as low-skill/low-tech and one of the fastest growing industries in the world, may offer a favorable strategy for growth. In addition, in this tourism-led growth literature it is not clear whether human capital plays a role. Using a panel of 72 countries (1980–2005) this study shed new light on the effect of tourism and human capital for economic growth. While our results confirm that the tourism sector indicator is always positive and significant in growth regressions they also show that increased education contributes to growth and that the role of the tourism sector is significantly larger in countries with higher aggregate levels of human capital. Our main results are robust to the inclusion of additional variables, the use of alternative estimators in the regression analysis and the use of different sub-samples. Overall, our results suggest that an increase in human capital endowments is always beneficial, even when the development strategy focuses on the expansion of a (successful) unskilled sector.