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On the Relationship between Length of Stay and Total Trip Expenditures: A Case Study of Instrumental Variable (IV) Regression Analysis

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  • Christer Thrane

    (Faculty of Economics and Organization Science, Lillehammer University College, Box 952, 2604 Lillehammer, Norway)

Abstract

The relationship between length of stay (LOS) and total trip expenditures (TTE) has been scrutinized many times within a micro-econometric framework, usually by means of ordinary least squares (OLS) regression analysis. The author questions this practice because much evidence suggests that LOS is an ‘endogenous' independent variable. One of the basic assumptions of OLS regression is thus violated, and a new method — instrumental variable (IV) regression — is called for to produce a consistent, unbiased estimate of LOS. A non-technical case study on IV regression shows that the LOS—TTE relationship estimated by IV regression analysis is only about half the analogue OLS estimate. The study concludes with several important implications for the statistical modelling of micro-level tourism expenditures and for cross-sectional regression-based tourism studies in general.

Suggested Citation

  • Christer Thrane, 2015. "On the Relationship between Length of Stay and Total Trip Expenditures: A Case Study of Instrumental Variable (IV) Regression Analysis," Tourism Economics, , vol. 21(2), pages 357-367, April.
    • Handle: RePEc:sae:toueco:v:21:y:2015:i:2:p:357-367
    DOI: 10.5367/te.2014.0357
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    References listed on IDEAS

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    Cited by:

    1. Faruk Urak & Nihat Küçük & Abdulbaki Bilgiç & Steven T Yen, 2023. "Modeling censored tourism expenditures in Turkey with non-normal and heteroscedastic errors: An application of the inverse hyperbolic sine double-hurdle model," Tourism Economics, , vol. 29(3), pages 718-741, May.
    2. Urszula Markowska-Przybyła, 2020. "Does Social Capital Matter for Total Factor Productivity? Exploratory Evidence from Poland," Sustainability, MDPI, vol. 12(23), pages 1-25, November.
    3. Christer Thrane, 2016. "Analysing related choices in tourism research," Tourism Economics, , vol. 22(3), pages 527-542, June.
    4. Yeongbae Choe & Hany Kim & Hyo-Jae Joun, 2019. "Differences in Tourist Behaviors across the Seasons: The Case of Northern Indiana," Sustainability, MDPI, vol. 11(16), pages 1-16, August.
    5. Mayer Marius & Vogt Luisa, 2016. "Economic effects of tourism and its influencing factors: An overview focusing on the spending determinants of visitors," Zeitschrift für Tourismuswissenschaft, De Gruyter, vol. 8(2), pages 169-198, November.
    6. David Boto-García & José Francisco Baños Pino, 2024. "The economics of second-home tourism: Are there expenditure reallocation effects from accommodation savings?," Tourism Economics, , vol. 30(4), pages 969-995, June.
    7. Glauber Eduardo de Oliveira Santos, 2016. "An efficient method for modelling tourists’ length of stay," Tourism Economics, , vol. 22(6), pages 1367-1379, December.

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