Does travelling foster international trade?

Abstract: The world´s total expenditures regarding leisure travelling and related expenditures corresponded to approximately 3000 billions USD in 2010. This substantial value makes the travelling industry and related markets important in an economic aspect. Data posted by the WTO states that between the years of 1995-2005 the world’s amount of tourism arrivals increased by approximately 50 %, and additionally UNWTO predicts that this progression is likely to continue. This implies that there are good reasons to analyse the economic impacts of travelling in a global context. This thesis aims to uncover if international travelling fosters international trade by analysing if the amount of tourism arrivals in a country has a positive effect on the country´s value of exports going to the EU15 countries. The time period covered is the years between 1995-2011. Previous research shows that the causality running from travelling to trade could be one or two-way, which means that our regression models are likely subjected to complications related to endogeneity. We attempt to solve this by using two different variables in order to capture travelling frequency. First we regress with respect to the amount of tourism arrivals, and additionally with respect to an instrumental variable consisting of the amount of World Heritage Sites. Our results show that the amount of tourism arrivals has a positive effect of the value of bilateral trade, while the instrumental variable does not have a significant effect.