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Research Note: Revenue and Labour Demand in the Hotel Industry: An Investigation of Endogeneity

Author

Listed:
  • Chiang-Ming Chen

    (Department of Economics, National Chi Nan University, 1 University Road, Puli, Nantou 54561, Taiwan)

  • Yu-Chen Lin

    (Department of Economics, Soochow University, Taipei, Taiwan)

  • Yu-Hsun Liao

    (Department of Economics, National Chi Nan University, Taiwan)

Abstract

This paper investigates the effect of hotel room revenue on labour demand based on data for international tourist hotels in Taiwan. Past empirical research on the relationship between hotel room revenue and labour demand has failed to take into account the fact that the causality between these two variables can be a two-way rather than just a one-way relationship. In other words, room revenue can affect labour demand and vice versa . The authors address this issue by using an instrumental variables (IV) regression approach in which room revenue and hotel labour demand can be determined simultaneously. The empirical results indicate that a failure to account for the two-way causality will underestimate the effect of room revenue on labour demand. The findings are of particular importance to hotel managers as the authors provide more accurate estimates for the relationship between hotel room revenue and labour demand.

Suggested Citation

  • Chiang-Ming Chen & Yu-Chen Lin & Yu-Hsun Liao, 2014. "Research Note: Revenue and Labour Demand in the Hotel Industry: An Investigation of Endogeneity," Tourism Economics, , vol. 20(2), pages 439-446, April.
    • Handle: RePEc:sae:toueco:v:20:y:2014:i:2:p:439-446
    DOI: 10.5367/te.2013.0279
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    References listed on IDEAS

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    1. Chiang-Ming Chen & Chia-Yu Yeh & Jin-Li Hu, 2011. "Influence of Uncertain Demand on Product Variety: Evidence from the International Tourist Hotel Industry in Taiwan," Tourism Economics, , vol. 17(6), pages 1275-1285, December.
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    Cited by:

    1. Fikru Kefyalew Alemayehu & Sigbjørn Landazuri Tveteraas, 2020. "Long-run labour flexibility in hospitality: A dynamic common correlated effects approach," Tourism Economics, , vol. 26(4), pages 704-718, June.

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