The effect of Dutch disease in the tourism sector: the case of Mediterranean countries

Sa？etak Purpose – A flourishing tourism sector can produce the same increase in income as that from natural resource exports. Unlike the oil, gas, and mineral extraction industries, which cause depletion of natural resources, the tourism industry has the potential to become a renewable industry, if well managed. In this context, the aim of this study is to investigate the existence of the Dutch disease effect in Mediterranean countries with high tourism dependence. Design – The data set used in this study was from 1996-2015, and it was obtained from the 2017 World Development Indicator [WDI] database. The logarithms of all variables were added to the model. In the study, 17 selected Mediterranean countries (Albania, Algeria, Bosnia and Herzegovina, Cyprus, Croatia, Egypt, France, Greece, Italy, Israel, Lebanon, Malta, Morocco, Slovenia, Spain, Tunisia, and Turkey) were used. Methodology – In the study, the methods used by Figini and Vici (2009), Holzner (2011), Ghalia and Fidrmuc (2015) are followed. In addition, Panel AMG, CCE co-integration estimators were used. Findings –The panel data analysis results for the country group imply that the Dutch disease does not exist overall but, on the other hand, the country based results reveal existence of the Dutch disease in some of the Mediterranean countries (Albania, Bosnia and Herzegovina, Croatia, Egypt, Greece, Italy, Morocco, and Turkey). Originality of the Research – The originality of this study is twofold. First of all, to our knowledge, this is the first study investigating the Dutch disease in the Mediterranean countries. Moreover, the study employs recently developed panel data econometric methods and allows us to get results for each economy separately, unlike conventional panel data analysis methods. Therefore, we predict that this study will make an important contribution to the literature