Impacts of Tourism and Fiscal Expenditure on Remote Islands in Japan: A Panel Data Analysis

LUNDBERG et al., 1995, VANHOVE, 2005. BALAGUER and CANTAVELLA-JORDA, 2002,
estimated the long-run effect of tourism on economic growth by applying some recent time series
techniques, and BAAIJENS and NIJKAMP, 2000, and BAAIJENS et al., 1998, adopted a meta-
analytic approach to empirical research on this topic. We also refer to MURINDE and RARAWA,
1996, who examined the effectiveness of stabilization policy on the Solomon Islands’ economy
using a macroeconomic model, and JOHNSON and THOMAS, 1990, who estimated the impact of
a major tourist attraction on local employment in the north of England.

⁸ We can definitely set different lag lengths to each variable. In this paper, however, we set all the
lag lengths equal (M) for simplicity.

⁹ This model is considered a distribution lag model, which is more flexible than the Koyck
distributed lag model given by a partial adjustment model.

¹⁰ All parameter estimates were calculated using TSP 5.0.

¹¹ If we assume that the error term in the partial adjustment model follows an error component
structure with individual effect, there exists a correlation between the error term and the
explanatory variables. In this paper, a model can be estimated using the Maximum Likelihood
Estimation method because the error term is supposed to be composed of only a time effect. The
dynamic panel data model, which is seen in BALTAGI, 2005, also has an individual effect on the
error term. In terms of estimation of tourism demand, SONG and WITT, 2000, comment on the
model and provide some applications.

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