Tourism : low-cost airlines, climate and economic crisis

342 Pages·2014·2.15 MB·English

by  Inchausti Sintes, Federico

UNIVERSIDAD DE LAS PALMAS DE GRAN CANARIA
Departamento de Análisis Económico Aplicado

Doctorado en Economía
Programa doctorado: Aplicaciones a las finanzas y seguros, a la economía sectorial,
al medio ambiente y las infraestructuras.

TESIS DOCTORAL

TOURISM: LOW-COST AIRLINES, CLIMATE AND ECONOMIC CRISIS

Tesis doctoral presentada por D. Federico Inchausti Sintes
Dirigida por Dr. Juan Luis Eugenio Martín

El Director, El Doctorando,

Las Palmas de Gran Canaria, Junio de 2014

“A mis padres,
a mi familia
y a mis amigos que también son familia.”

Contents
Contents ...................................................................................................................................i 
List of figures ......................................................................................................................... v 
List of tables ........................................................................................................................ vii 

Chapter 1: Does low-cost travelling imply higher tourism expenditure in the
destination?
1.1 Introduction ...................................................................................................................... 1 
1.2 State of the art .................................................................................................................. 4 
1.2.1. LCCs characteristics ................................................................................................. 4 
1.2.2. Main consequences of the presence of LCCs in a destination ................................. 5 
1.2.3. Have LCCs increased the flow of tourism? ............................................................. 5 
1.2.4. Have LCC passengers got a different behaviour with respect to traditional carrier
passengers? ......................................................................................................................... 6 
1.2.5. Have LCCs presence promoted economic growth in the region where they travel
to? ....................................................................................................................................... 7 
1.2.6. Are LCCs passengers’ savings in the origin transferred to higher tourism
expenditure at the destination? ........................................................................................... 8 
1.2.7. Modeling tourism expenditure ................................................................................. 8 
1.2.7.1. Sample selection models .................................................................................. 9 
1.2.7.2. System of equations ......................................................................................... 9 
1.2.7.3. Other methodologies ...................................................................................... 10 
1.3 Methodology .................................................................................................................. 11 
1.3.1. First approach: Descriptive analysis ...................................................................... 11 
1.3.2. Second approach: Regression analysis ................................................................... 12 
1.3.3. Third approach: Simultaneous system of equations ............................................... 13 
1.3.4. Theoretical microeconomic motivation ................................................................. 14 
1.3.5. Econometric approach to the microeconomic motivation ...................................... 15 
1.4 Case study ...................................................................................................................... 17 
1.5 Methodology .................................................................................................................. 19 
1.5.1. Endogeneity ............................................................................................................ 20 
1.5.2. Contemporary correlations among error terms ...................................................... 20 
i
1.5.3. Heteroskedasticity ................................................................................................. 21 
1.5.4. Estimation under the presence of endogeneity, contemporary correlation error
terms and heteroskedasticity. ........................................................................................... 21 
1.5.5. The reduced form................................................................................................... 22 
1.6 Results ........................................................................................................................... 23 
1.6.1. Reweighting effect ................................................................................................. 23 
1.6.2. Results from the structural form ............................................................................ 27 
1.6.3. Results from the reduced form .............................................................................. 35 
1.6.4. Savings transfer ratios ........................................................................................... 36 
1.7 Conclusions and further research .................................................................................. 37 

Chapter 2: Understanding tourists´economising strategies during the global economic
crisis
2.1 Introduction ................................................................................................................... 41 
2.2 State of the art ................................................................................................................ 45 
2.1. Macroeconomic indicators ....................................................................................... 46 
2.2. Microeconomic indicators ........................................................................................ 48 
2.3 Methodology .................................................................................................................. 49 
2.3.1. Econometric modeling ........................................................................................... 49 
2.4 Case study ...................................................................................................................... 53 
2.5 Results ........................................................................................................................... 54 
2.5.1. Economising strategies by country ........................................................................ 54 
2.5.2. Estimation .............................................................................................................. 56 
2.5.3. Post-estimation analysis ........................................................................................ 59 
2.6 Conclusions and further research .................................................................................. 66 

Chapter 3: Tourism: economic growth, employment and Dutch Disease.
3.1 Introduction .................................................................................................................... 69 
3.1.1. GDP and employment in Spain at a glance ........................................................... 72 
3.1.2. Inbound Tourism in Spain at a glance ................................................................... 73 
3.2 State of the art ................................................................................................................ 76 
3.2.1. Economic growth theories ..................................................................................... 76 
3.2.2. Tourism and economic growth .............................................................................. 76 
3.2.2.1. Tourism and economic growth by countries .................................................. 77 
3.2.2.2. Tourism and economic growth by regions ..................................................... 77 
3.2.2.3. Tourism and capital accumulation .................................................................. 78 
3.2.3. Tourism and employment ...................................................................................... 79 
3.2.4. Tourism and CGE models ..................................................................................... 80 
ii
3.2.5. Unemployment in CGE models ............................................................................. 83 
3.3 Theoretical framework of the impact of tourism on an economy: TNT-T model ......... 86 
3.4 Case study ...................................................................................................................... 89 
3.5 Methodology .................................................................................................................. 90 
3.5.1. Recursive-dynamic CGE model (BLOFIVIS models) ........................................... 90 
3.5.1 Main equations ........................................................................................................ 92 
3.5.2. Model closure ......................................................................................................... 94 
3.5.3. Shock, scenarios and calibration path .................................................................... 95 
3.6 Results ............................................................................................................................ 96 
3.6.1. Unemployment ....................................................................................................... 96 
3.6.2. Gross real added value (GRAV), foreign account deficit and capital accumulation97 
3.6.3. Domestic demand ................................................................................................. 101 
3.6.4. Winners and losers: “Dutch Disease” .................................................................. 102 
3.6.4.1. Expenditure effect ........................................................................................ 104 
3.6.4.2. Resource effect ............................................................................................. 105 
3.7 Conclusions and further research ................................................................................. 110 

Chapter 4: The role of climate and the tourism destination choice
4.1 Introduction .................................................................................................................. 113 
4.2 State of the art .............................................................................................................. 115 
4.2.1. Destination choice: the last step in a complex decision process .......................... 115 
4.2.1.1. The role of climate ....................................................................................... 116 
4.2.1.2. The role of distance ...................................................................................... 117 
4.2.1.3. Destination choice methodologies: all roads guide to mixed logit .............. 118 
4.3 Case study .................................................................................................................... 120 
4.4 Methodology ................................................................................................................ 121 
4.5 Results .......................................................................................................................... 122 
4.6 Conclusions and further research ................................................................................. 128 

Annexs
Annex 3.1. TSA-IOT and SAM ......................................................................................... 131 
A.3.1.1 Introduction ........................................................................................................... 131 
A.3.1.2 Integration of the IOT and the TSA ...................................................................... 132 
A.3.1.2.1. Input-Output Table accounting framework ................................................... 132 
A.3.1.2.2. Tourism Satellite Account (TSA) .................................................................. 136 
A.3.1.3 TSA and IOT ......................................................................................................... 138 
A.3.1.3.1 Supply Table ................................................................................................... 144 
iii
A.3.1.3.1.1 Production block ..................................................................................... 144 
A.3.1.3.1.2 Imports .................................................................................................... 147 
A.3.1.3.2 Use Table ....................................................................................................... 148 
A.3.1.3.2.1 Intermediate demand .............................................................................. 148 
A.3.1.3.2.2 Final demand .......................................................................................... 151 
A.3.1.3.2.3 Gross Capital Formation ......................................................................... 159 
A.3.1.3.2.4 Exports .................................................................................................... 160 
A.3.1.3.2.5 Mathematical adjustment ................................................................................ 161 
A.3.1.4 New IOT: comparison and conclusion ................................................................. 168 
A.3.1.5 SAM ...................................................................................................................... 169 
A.3.1.5.1. Allocation of primary income account: ........................................................ 173 
A.3.1.5.2 Secondary distribution of income account: ................................................... 183 
A.3.1.5.3 Use of disposable income account: ............................................................... 188 
A.3.1.5.4 Capital account .............................................................................................. 189 
A.3.1.5.5 Capital ROW account .................................................................................... 195 
A.3.1.6 Supply and use table with tourism categories....................................................... 198 
Annex 3.2 Recursive-dynamic CGE model ...................................................................... 207 
A.3.2.1 Zero profit conditions ....................................................................................... 207 
A.3.2.2. Market clearance conditions ............................................................................ 215 
A.3.2.3. Income balance (budget constraint) ................................................................. 222 
Turismo: Aerolíneas de bajo coste, clima y crisis económica ........................................... 225 
Annex. Codes .................................................................................................................... 293 
References ......................................................................................................................... 301 

iv
List of figures
Figure 1. Effect of the variables paand pal ..................................................................... 13 
Figure 2. Tourism arrivals and expenditure ........................................................................ 43 
Figure 3. Probabilities of the economising strategies ......................................................... 61 
Figure 4. Final effects on the destination ............................................................................ 63 
Figure 5. Moving median probability of economising strategies by climate ...................... 65 
Figure 6. Moving median probability of economising strategies by age ............................ 66 
Figure 7. Real GDP growth rate (2008=100) and employment growth rate by sectors (%) 72 
Figure 8. Unitary labour cost and unemployment rate ........................................................ 73 
Figure 9. Inbound tourism in Spain from 2002 to 2012 ...................................................... 75 
Figure 10. Unemployment (minimum wage) ...................................................................... 84 
Figure 11. Unemployment (wage curve) ............................................................................. 85 
Figure 12. TNT-T model ..................................................................................................... 88 
Figure 13. TNT-T model with unemployment and capital accumulation ........................... 89 
Figure 14. General structure of the blovifis model. ............................................................ 91 
Figure 15. Unemployment rate with change in employment elasticity’s respect to the BAU
situation (%) ........................................................................................................................ 97 
Figure 16. Change in gross real added value, current account deficit and capital
accumulation respect to the BAU situation (%) ................................................................ 100 
Figure 17. Changes in domestic demand respect to the BAU situation (%) ..................... 102 
Figure 18. Change in the real exchange rate (%) .............................................................. 104 
Figure 19. Scheme of the datasets .................................................................................... 132 
Figure 20. Disentangling AISS values into the SAM ...................................................... 171 
v
Figure 21. Disentangling the AISS values into the SAM according to the system of
equation (mp1) ................................................................................................................... 179 
Figure 22. Armington structure ......................................................................................... 208 
Figure 23. Activities structure ........................................................................................... 209 
Figure 24. Household consumption structure .................................................................... 212 
Figure 25. Government structure ...................................................................................... 213 
Figure 26. Tourism structure ............................................................................................. 214 
Figure 27. Investment structure ......................................................................................... 215 
vi