Tourism and Economic Complexity: What 123 Economies Reveal
Updated: Oct 9
A new study co-authored by Canh Phuc Nguyen (HAPRI Senior Research Associate) finds that tourism spending helps economies build more diverse and sophisticated production capabilities — but not in the same way everywhere. Domestic tourism lifts economic complexity across every income group, while international tourism's benefits are concentrated in middle-income economies.
Context
Economic complexity — an economy's ability to produce diverse and sophisticated products — is widely treated as a determinant of economic resilience and growth. Tourism, meanwhile, is one of the most commonly promoted engines of economic development, especially in emerging economies where it is positioned as a fast route to foreign exchange, jobs, and investment.
Yet the two literatures have rarely met. Tourism's specific effects on a nation's economic complexity remain underexplored, which leaves policymakers designing tourism-led development strategies without evidence on whether those strategies also strengthen — or hollow out — the productive base underneath them. This paper is motivated by that gap.
Methods
The authors assemble a dataset of 123 economies — 45 high-income, 33 upper-middle-income, and 45 lower-middle-income — observed over two decades, and estimate dynamic panel data models chosen specifically to address potential endogeneity between tourism and economic complexity. Domestic and international tourism expenditure are examined separately, and the sample is split by income level to test whether the relationship is uniform across stages of development.
Key findings
Across the full global sample, both domestic and international tourism expenditure significantly raise economic complexity.
Domestic tourism is the more dependable driver: its positive effect holds consistently across every income group in the sample.
International tourism's effect flips with income level — positive in lower- and upper-middle-income economies, but negative in high-income ones.
The pattern gives empirical backing to tourism-led development policies while arguing that those policies should be tailored to a country's income level rather than applied uniformly.
Policy implications
The study provides insights for policymakers and researchers on leveraging tourism for sustainable economic development, emphasising the need for tailored strategies based on income levels.
Keywords:
Economic Complexity
Domestic Tourism
International Tourism
Tourism-Led Development
Dynamic Panel Data
Income Levels
Link:
Citation:
Nguyen, C. P., Bui, D., Nguyen, B. Q., & Tran, D. T. L. (2025). The effect of domestic and international tourism on economic complexity: a global perspective. Journal of Policy Research in Tourism, Leisure and Events, 1-20.
