The tourism and travel industry and its effect on the Great Recession: A multilevel survival analysis

Abstract

Does a country with a heavy dependence on a tourism economy have a tendency to succumb to more risk in a recession? With the shift from manufacturing-based economies in the developing world toward service-based industries, including tourism, a reliance on the tourism industry may erode economic stability in tourism-based countries, making them more prone to fall into a recession due to higher risks. In this paper, we wish to emphasise the positive impact of tourism specialisation indices in the international economy on the probability occurrence of a so-called Great Recession. This article uses a multilevel survival analysis and a generalised linear mixed-effect (GLMM) structure modelling to investigate the impact of tourism development on the probability of recession frequency (risk in terms of months of duration and severity), by using data collected from 2007 to 2013 from 71 countries around the world, to see if recession frequency is positively correlated with the various indicators of tourism development. Two GLMMs were fitted to this data: logistic regression and count regression with a Poisson distribution. Results for both regressions show considerable evidence that the ratio between the number of overnight stays and the resident population and travel services as a percentage of commercial service exports positively impacts the probability for a country (from our sample) to experience a recession event and can make recession worse in terms of severity, measured in months.

Keywords

• Recession
• duration
• risk
• tourism
• multilevel survival analysis
• GLMM