Optimal Level of Tourism Specialization and the Mediating Role of Productivity

Abstract

Traditionally, tourism literature has systematically explored the relationship between tourism development and economic growth. The standard tool used for this purpose has been the Tourism-Led Growth Hypothesis (TLGH). However, more recent literature has shifted its focus from the effects of tourism on economic growth toward the true economic development of territories. Within this context, a recent article by Perles & Moreno (2024) develops the concept of Tourism as Optimal Choice Hypothesis (TOCH) that tests the optimal weight of tourism in the sectoral composition of destinations to maximize the well- being of their residents. Given the relative novelty of the concept, there are very few studies that empirically explore this hypothesis. Therefore, this study seeks to address this gap in the research. Specifically, it investigates the TOCH in Spain, evaluating the ideal share that tourism should have of regional economies and assessing the role of productivity in driving growth. Using static and dynamic panel data techniques for 17 Spanish regions (N=17) (all except the autonomous cities of Ceuta and Melilla) for the period 2009-2021 (T=13), the initial results show that economic development may fall to its lowest level when tourism specialization levels are at 23–25%, with only the Canary and Balearic Islands nearing this range. On the other hand, optimal specialization is found to be at 11–17%, with regions such as Cantabria, Catalonia, Madrid, Valencia, and Asturias aligning at around 11–12%. Notably, the expected mediating role of productivity remains unconfirmed. From a practical viewpoint, the article provides policymakers with a framework to gauge the impact of tourism as a primary growth engine or in combination with other sectors to optimize development outcomes.