The relationship between tourism and economic growth: An investigation in EU countries

Tourism affects economic growth through various channels such as generating income and employment, affecting the balance of payments, increasing tax revenues from tourism activities, and encouraging infrastructure investments in sectors directly or indirectly related to tourism. The European Union (EU) is among the world's top tourist destinations. Moreover, tourism is one of the largest sectors of the EU economy. In this context, the aim of this study is to investigate the impact of tourism on economic growth in 20 EU countries using the Augmented Mean Group Estimator (AMG) with data covering the period 1995-2020. In addition, the study investigates the effects of capital accumulation, labor, and COVID-19 on economic growth. The empirical findings from the AMG estimator reveal that tourism has a positive impact on economic growth. Similarly, capital accumulation and labor have been found to enhance economic growth. This finding suggests that policies that support the tourism sector, promote capital accumulation, and increase labor market efficiency play a key role in achieving the economic growth target in EU countries. Moreover, COVID-19 is found to have a negative impact on economic growth. This finding demonstrates that the measures and restrictions implemented to combat COVID-19 have had a contractionary effect on economic growth. Accordingly, the importance of developing effective crisis management policies and strategies to ensure sustainable economic growth comes to the forefront.