A Structural Equation that Estimates the Empact of GDP and Some of Its Factors on Tourism

Abstract

This paper investigates the relationship between economic activity and some of its factors such as trade and capital, and Tourism. The interest of this study represents a "system of relationships", some independent variables and some dependent variables as well When researchers aim to model a complex causal system with queries that qualify as a "system" of relationships, structural equation modeling (SEM) proves to be very useful. For this reason, structural equation modeling is employed in this study. The analysis examines European countries. The data of the variables used are data belonging to European countries. The structural equation model estimated that the improvement of infrastructure and innovation have a significant effect respectively on trade and capital, which are two crucial factors that affect the economic growth of countries. The model also estimates that economic growth significantly impacts the growth of tourism. Therefore, it is essential to emphasize that the use of initiatives to improve infrastructure, innovation, and economic growth would boost the development of Tourism in countries.