The threshold effect of tourism economy development on the relationship between FDI and SIDS' inclusive growth

• Published in: Current issues in tourism Vol. 26; no. 24; pp. 4001 - 4017
• Main Authors: Wang, Juan, Wang, Kexin, Ding, Xuanwen
• Format: Journal Article
• Language: English
• Published: Abingdon Routledge 17.12.2023; Taylor & Francis Ltd
• Subjects: Autoregressive models; Economic development; Economic growth; Economics; FDI; Heterogeneity; inclusive growth; Regression models; small island developing states; threshold effect; Tourism; tourism economy development; China
• ISSN: 1368-3500; 1747-7603
• DOI: 10.1080/13683500.2022.2154198

Overseas investment and tourism economy development play important roles in the inclusive growth of small island developing states (SIDS). Taking the level of tourism economy growth as a threshold, this study explores the relationship between China's FDI to 29 SIDS and SIDS' inclusive growth from 2005 to 2020. This connection is investigated via the entropy method, a panel autoregressive model, and a panel threshold regression model and data from the World Bank and the Ministry of Commerce of China. Several findings emerge: (1) SIDS' inclusive growth index demonstrated an upward trend, with PROFIT-type SIDS' inclusive growth being highest; (2) China's FDI to SIDS could effectively promote SIDS' inclusive growth; and (3) tourism economic growth had a threshold effect and region-type heterogeneity within the process of FDI and SIDS' inclusive growth. The positive impact of China's FDI on SIDS' inclusive growth rose by 42.308% when SIDS' tourism receipts (% of GDP) reached 25.950%. The threshold effect was strongest in the AIMS region and was not significant in the Pacific region. A double-threshold effect applied to PROFIT-type SIDS. Additionally, the threshold effect was strongest in SITEs-type SIDS and was not significant in MIRAB-type SIDS.