Dynamic threshold effects of corruption on tourism demand: A nonlinear relationship

Abstract

This note investigates the complex relationship between corruption and tourism demand, employing a dynamic panel threshold model in the spirit of Seo and Shin (2016). Using a panel dataset of international tourism destinations over the period 2008–2022 and two corruption measures reflecting actual control of corruption and perceived corruption in the public sector, we unravel a non-monotonic relationship between corruption and tourism demand. The relevant curvature (‘ U-shaped ’ or ‘ Inverted U-shaped ’) depends on the corruption indicator used in the analysis. Policymakers should account for the nonlinear effects to ensure that anti-corruption measures effectively boost tourism demand alongside necessary institutional reforms.