Infrastructure Investment, Tourism and Economic Growth in Sub-Saharan Africa

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2020-10

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University Of Ghana

Abstract

The belief that tourism drives economic growth is what is popularly known in the literature as the tourism-led growth hypothesis. Despite this well-known belief, not many studies have rigorously looked at the relationship between tourism and economic growth. As such, this study seeks to add to the literature in that regard. More importantly, narrowing it down to the SSA region, the increase in international tourism receipts coupled with an upsurge in the tourist arrivals especially in the last two decades makes the kind of growth prospects the tourism industry holds for the region more profound and worth studying. However, one main factor restricting the tourism sectors of the region from realizing their full growth potential is inadequate infrastructure. The problem of inadequate infrastructure partly stems from the low level of investment in infrastructure in these regions. Given that tourism thrives on the infrastructure that supports it, it becomes imperative to look at how investment in infrastructure enhances tourism’s impact on economic growth. Therefore, this study addresses this by employing the System Generalized Methods of Moments (GMM) estimation technique on a dynamic panel data from 41 SSA countries from 2000-2018. The results from the study confirm that indeed tourism thrives on the infrastructure that supports it and as a result investment in infrastructure is essential to promote tourism. The tourism-led growth hypothesis in the case of SSA is also confirmed and the study further reveals that tourism’s impact on economic growth for the SSA region is also dependent on the level of investment in infrastructure. With this study being the first to explore the relationship among investment in infrastructure, tourism and economic growth in the case of SSA and also owing to the methodology employed, further studies could set out to investigate whether the contribution of other sectors to economic growth, such as manufacturing and agriculture, could also be enhanced through infrastructure investment since these other sectors also thrive on the kind of infrastructure that supports them.

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MPhil. Finance

Keywords

Investment, Tourism, Economic Growth, Sub-Saharan Africa

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