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Research Note: Estimating Price and Income Demand Elasticities for Spain Separately by the Major Source Markets

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  • Marcos à lvarez-Diaz
  • Manuel González-Gómez
  • Maria Soledad Otero-Giráldez

Abstract

The main goal of this study is to estimate the price and income elasticity of demand for tourism to Spain. This estimation is done separately for the major international source markets for Spain: Germany, the UK, Italy and the Netherlands. For this purpose, the authors use the autoregressive distributed lag (ARDL) approach to cointegration and the bootstrap method to construct empirical confidence intervals for each estimate. The results reveal that the tourism demand in all the countries studied has a similar income elasticity, which is approximately unitary. However, there is an important difference with regard to price elasticity: tourism demand from the UK is statistically price inelastic, but demand is elastic for the remaining countries. This finding is relevant because, first, it underlines the importance of studying the source markets separately instead of analysing an aggregate international tourism demand, and, second, it supports the need to implement different tourism policies and strategies with respect to the pricing decisions for each source market.

Suggested Citation

  • Marcos à lvarez-Diaz & Manuel González-Gómez & Maria Soledad Otero-Giráldez, 2015. "Research Note: Estimating Price and Income Demand Elasticities for Spain Separately by the Major Source Markets," Tourism Economics, , vol. 21(5), pages 1103-1110, October.
    • Handle: RePEc:sae:toueco:v:21:y:2015:i:5:p:1103-1110
    DOI: 10.5367/te.2014.0396
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    References listed on IDEAS

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    1. Maria De Mello & Alan Pack & M. Thea Sinclair, 2002. "A system of equations model of UK tourism demand in neighbouring countries," Applied Economics, Taylor & Francis Journals, vol. 34(4), pages 509-521.
    2. M. Hashem Pesaran & Yongcheol Shin & Richard J. Smith, 2001. "Bounds testing approaches to the analysis of level relationships," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 16(3), pages 289-326.
    3. James Laurenceson & Joseph C.H. Chai, 2003. "Financial Reform and Economic Development in China," Books, Edward Elgar Publishing, number 2714.
    4. Haiyan Song & Peter Romilly & Xiaming Liu, 2000. "An empirical study of outbound tourism demand in the UK," Applied Economics, Taylor & Francis Journals, vol. 32(5), pages 611-624.
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    Cited by:

    1. Manuel González-Gómez, 2022. "European outbound tourism expansion on the islands of Cape Verde," Tourism Economics, , vol. 28(4), pages 1129-1150, June.

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