Does good-governance influence foreign tourist inflows?

Abstract

In recent years tourism has emerged as a key driver of economic growth as countries are increasingly proactive in improving governance standards to enhance their tourism competitiveness in attracting foreign tourist inflows. This paper explores the nexus between good governance and international tourism in the U.S. during 2008-2019 using the continuous wavelet transform method and maximal overlap discrete wavelet transform method to examine the comovement and lead-lag relationships in the time-frequency domains. We find significant interrelatedness between good governance indicators and international inbound tourism indicators in the medium- and long-run frequency domains as the governance indicators like control of corruption, regulatory quality, rule of law, and voice & accountability substantially affect tourist arrivals. As a robustness measure, we provide additional evidence using Indian data. Overall, our results provide strong evidence that good governance matters for foreign tourist inflows thereby enhancing the tourism competitiveness of the host country. The policy implication is that countries must enhance their good governance to boost sustainable tourism competitiveness in attracting tourist inflows.