IDEAS home Printed from https://ideas.repec.org/p/hai/wpaper/201303.html
   My bibliography  Save this paper

Estimating Demand Elasticities in Non-Stationary Panels: The Case of Hawaii's Tourism Industry

Author

Listed:
  • Carl S. Bonham

    (University of Hawaii Department of Economics)

  • Peter Fuleky

    (University of Hawaii Department of Economics)

  • Qianxue Zhao

    (University of Hawaii Economic Research Organizaion)

Abstract

Tourism demand elasticities are central to marketing, forecasting and policy work, but the wide array of occasionally counterintuitive estimates produced by existing empirical studies implies that some of those results may be inaccurate. To improve the precision of estimates, it is natural to turn to the richness of panel data. However, panel estimation using non-stationary data requires careful attention to the likely presence of common shocks shared across the underlying macroeconomic variables and across regions. Several recently developed econometric tools for panel data analysis attempt to deal with such cross-sectional dependence. We apply the estimator of Pesaran (2006) and Kapetinos, Pesaran and Yamagata (2010) to obtain tourism demand elasticities in non-stationary heterogeneous dynamic panels subject to common factors. We study the extent to which tourism arrivals from the US Mainland to Hawaii are driven by fundamentals such as real personal income and the cost of the trip, and we nd that neglecting cross-sectional dependence in the data leads to spurious results.

Suggested Citation

  • Carl S. Bonham & Peter Fuleky & Qianxue Zhao, 2013. "Estimating Demand Elasticities in Non-Stationary Panels: The Case of Hawaii's Tourism Industry," Working Papers 201303, University of Hawaii at Manoa, Department of Economics.
    • Handle: RePEc:hai:wpaper:201303
    as

    Download full text from publisher

    File URL: http://www.economics.hawaii.edu/research/workingpapers/WP_13-3.pdf
    File Function: First version, 2013
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Pierre Perron & Gabriel Rodríguez, 2003. "Searching For Additive Outliers In Nonstationary Time Series," Journal of Time Series Analysis, Wiley Blackwell, vol. 24(2), pages 193-220, March.
    2. M. Hashem Pesaran, 2006. "Estimation and Inference in Large Heterogeneous Panels with a Multifactor Error Structure," Econometrica, Econometric Society, vol. 74(4), pages 967-1012, July.
    3. Boopen Seetanah & Ramesh Durbarry & J.F. Nicolas Ragodoo, 2010. "Using the Panel Cointegration Approach to Analyse the Determinants of Tourism Demand in South Africa," Tourism Economics, , vol. 16(3), pages 715-729, September.
    4. Bai, Jushan & Kao, Chihwa & Ng, Serena, 2009. "Panel cointegration with global stochastic trends," Journal of Econometrics, Elsevier, vol. 149(1), pages 82-99, April.
    5. Kapetanios, G. & Pesaran, M. Hashem & Yamagata, T., 2011. "Panels with non-stationary multifactor error structures," Journal of Econometrics, Elsevier, vol. 160(2), pages 326-348, February.
    6. Sul, Donggyu, 2009. "Panel unit root tests under cross section dependence with recursive mean adjustment," Economics Letters, Elsevier, vol. 105(1), pages 123-126, October.
    7. Anindya Banerjee & Massimiliano Marcellino & Chiara Osbat, 2004. "Some cautions on the use of panel methods for integrated series of macroeconomic data," Econometrics Journal, Royal Economic Society, vol. 7(2), pages 322-340, December.
    8. Christian Gengenbach & Franz C. Palm & Jean-Pierre Urbain, 2010. "Panel Unit Root Tests in the Presence of Cross-Sectional Dependencies: Comparison and Implications for Modelling," Econometric Reviews, Taylor & Francis Journals, vol. 29(2), pages 111-145, April.
    9. Neelu Seetaram & Sylvain Petit, 2012. "Panel Data Analysis," Chapters, in: Larry Dwyer & Alison Gill & Neelu Seetaram (ed.), Handbook of Research Methods in Tourism, chapter 7, Edward Elgar Publishing.
    10. Pesaran, M. Hashem & Smith, Ron, 1995. "Estimating long-run relationships from dynamic heterogeneous panels," Journal of Econometrics, Elsevier, vol. 68(1), pages 79-113, July.
    11. Anindya Banerjee & Massimiliano Marcellino & Chiara Osbat, 2005. "Testing for PPP: Should we use panel methods?," Empirical Economics, Springer, vol. 30(1), pages 77-91, January.
    12. Bonham, Carl & Gangnes, Byron & Zhou, Ting, 2009. "Modeling tourism: A fully identified VECM approach," International Journal of Forecasting, Elsevier, vol. 25(3), pages 531-549, July.
    13. M. Hashem Pesaran, 2021. "General diagnostic tests for cross-sectional dependence in panels," Empirical Economics, Springer, vol. 60(1), pages 13-50, January.
    14. Witt, Stephen F. & Witt, Christine A., 1995. "Forecasting tourism demand: A review of empirical research," International Journal of Forecasting, Elsevier, vol. 11(3), pages 447-475, September.
    15. Neelu Seetaram & Sylvain Petit, 2012. "Panel data analysis in Tourism Research," Post-Print hal-01831529, HAL.
    16. James H. Stock & Mark W. Watson, 1989. "New Indexes of Coincident and Leading Economic Indicators," NBER Chapters, in: NBER Macroeconomics Annual 1989, Volume 4, pages 351-409, National Bureau of Economic Research, Inc.
    17. Peter Pedroni, 2001. "Purchasing Power Parity Tests in Cointegrated Panels," Department of Economics Working Papers 2001-01, Department of Economics, Williams College.
    18. Crouch, Geoffrey I., 1996. "Demand elasticities in international marketing : A meta-analytical application to tourism," Journal of Business Research, Elsevier, vol. 36(2), pages 117-136, June.
    19. repec:hal:journl:peer-00768190 is not listed on IDEAS
    20. Falk, Martin, 2010. "A dynamic panel data analysis of snow depth and winter tourism," Tourism Management, Elsevier, vol. 31(6), pages 912-924.
    21. Westerlund, J. & Urbain, J.R.Y.J., 2011. "Cross sectional averages or principal components?," Research Memorandum 053, Maastricht University, Maastricht Research School of Economics of Technology and Organization (METEOR).
    22. Nelson, Larry A. & Dickey, David A. & Smith, Joy M., 2011. "Estimating time series and cross section tourism demand models: Mainland United States to Hawaii data," Tourism Management, Elsevier, vol. 32(1), pages 28-38.
    23. Peter Pedroni, 2001. "Purchasing Power Parity Tests In Cointegrated Panels," The Review of Economics and Statistics, MIT Press, vol. 83(4), pages 727-731, November.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. repec:hae:wpaper:2013-2 is not listed on IDEAS
    2. Markus Eberhardt & Francis Teal, 2008. "Modeling Technology and Technological Change in Manufacturing: How do Countries Differ?," CSAE Working Paper Series 2008-12, Centre for the Study of African Economies, University of Oxford.
    3. Markus Eberhardt & Francis Teal, 2010. "Aggregation versus Heterogeneity in Cross-Country Growth Empirics," CSAE Working Paper Series 2010-32, Centre for the Study of African Economies, University of Oxford.
    4. Apergis, Nicholas, 2016. "Environmental Kuznets curves: New evidence on both panel and country-level CO2 emissions," Energy Economics, Elsevier, vol. 54(C), pages 263-271.
    5. Naima Chrid & Sami Saafi & Mohamed Chakroun, 2021. "Export Upgrading and Economic Growth: a Panel Cointegration and Causality Analysis," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 12(2), pages 811-841, June.
    6. Peter Fuleky & Luigi Ventura & Qianxue Zhao, 2018. "Common correlated effects and international risk sharing," International Finance, Wiley Blackwell, vol. 21(1), pages 55-70, March.
    7. Adolfo Maza & Paula Gutiérrez-Portilla, 2022. "Outward FDI and exports relation: A heterogeneous panel approach dealing with cross-sectional dependence," International Economics, CEPII research center, issue 170, pages 174-189.
    8. Markus Eberhardt & Francis Teal, 2013. "No Mangoes in the Tundra: Spatial Heterogeneity in Agricultural Productivity Analysis," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 75(6), pages 914-939, December.
    9. Güney, Taner, 2022. "Solar energy, governance and CO2 emissions," Renewable Energy, Elsevier, vol. 184(C), pages 791-798.
    10. Breitung, Jörg & Pesaran, Mohammad Hashem, 2005. "Unit roots and cointegration in panels," Discussion Paper Series 1: Economic Studies 2005,42, Deutsche Bundesbank.
    11. Gazi Hassan & Arusha Cooray & Mark Holmes, 2017. "The effect of female and male health on economic growth: cross-country evidence within a production function framework," Empirical Economics, Springer, vol. 52(2), pages 659-689, March.
    12. repec:hae:wpaper:2013-3 is not listed on IDEAS
    13. Everaert, Gerdie, 2014. "A panel analysis of the fisher effect with an unobserved I(1) world real interest rate," Economic Modelling, Elsevier, vol. 41(C), pages 198-210.
    14. Declan French, 2012. "Causation between health and income: a need to panic," Empirical Economics, Springer, vol. 42(2), pages 583-601, April.
    15. Dong, Kangyin & Hochman, Gal & Zhang, Yaqing & Sun, Renjin & Li, Hui & Liao, Hua, 2018. "CO2 emissions, economic and population growth, and renewable energy: Empirical evidence across regions," Energy Economics, Elsevier, vol. 75(C), pages 180-192.
    16. Nicholas Apergis & Rangan Gupta & Chi Keung Marco Lau & Zinnia Mukherjee, 2016. "An Analysis of the Relationship between U.S. State Level Carbon Dioxide Emissions and Health Care Expenditure," Working Papers 201618, University of Pretoria, Department of Economics.
    17. Jaap W. B. Bos & Bertrand Candelon & Claire Economidou, 2016. "Does knowledge spill over across borders and technology regimes?," Journal of Productivity Analysis, Springer, vol. 46(1), pages 63-82, August.
    18. Apergis, Nicholas & Gupta, Rangan & Lau, Chi Keung Marco & Mukherjee, Zinnia, 2018. "U.S. state-level carbon dioxide emissions: Does it affect health care expenditure?," Renewable and Sustainable Energy Reviews, Elsevier, vol. 91(C), pages 521-530.
    19. Dong-Hyeon Kim & Shu-Chin Lin, 2017. "Natural Resources and Economic Development: New Panel Evidence," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 66(2), pages 363-391, February.
    20. Francis Teal & Markus Eberhardt, 2010. "Productivity Analysis in Global Manufacturing Production," Economics Series Working Papers 515, University of Oxford, Department of Economics.
    21. Sencer Atasoy, Burak, 2017. "Testing the environmental Kuznets curve hypothesis across the U.S.: Evidence from panel mean group estimators," Renewable and Sustainable Energy Reviews, Elsevier, vol. 77(C), pages 731-747.

    More about this item

    Keywords

    Panel Cointegration; Cross-Sectional Dependence; Tourism Demand; Hawaii;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • L83 - Industrial Organization - - Industry Studies: Services - - - Sports; Gambling; Restaurants; Recreation; Tourism
    • R41 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Transportation: Demand, Supply, and Congestion; Travel Time; Safety and Accidents; Transportation Noise

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:hai:wpaper:201303. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Web Technician (email available below). General contact details of provider: https://edirc.repec.org/data/deuhius.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.