Start Date

7-1-2011 8:00 AM

End Date

7-1-2011 9:15 AM

Track

1. Track 1 – Formal Paper Presentation

Subject Area

Travel and Tourism

Faculty Member

Dr. Hong-bumm Kim, kimhb@sejong.ac.kr Dr. SooCheong (Shawn) Jang, jang12@purdue.edu

Abstract

An implicit assumption shared by modern tourism demand models is that current consumption is determined only by current income. However, the consumption literature often finds evidence of significant wealth effect, through which the consumers adjust their spending based on adaptive expectations of future earnings even when their real income does not change. Suspecting that tourism demand is also subject to such consumption behavior, this study tests for wealth effect from housing and financial assets, which constitute some 97 percent of total assets in Korean households, on outbound tourism demand. The result suggests that wealth effect from housing is significant on outbound tourism demand, while the financial assets do not display a significant relationship with demand. Implications and suggestions are provided with the findings of the study.

Keywords

Wealth Effect, Consumption Theory, Tourism Demand Model, Permanent Income Hypothesis, Life Cycle Hypothesis

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Jan 7th, 8:00 AM Jan 7th, 9:15 AM

Wealth Effect and Demand for Outbound Tourism

An implicit assumption shared by modern tourism demand models is that current consumption is determined only by current income. However, the consumption literature often finds evidence of significant wealth effect, through which the consumers adjust their spending based on adaptive expectations of future earnings even when their real income does not change. Suspecting that tourism demand is also subject to such consumption behavior, this study tests for wealth effect from housing and financial assets, which constitute some 97 percent of total assets in Korean households, on outbound tourism demand. The result suggests that wealth effect from housing is significant on outbound tourism demand, while the financial assets do not display a significant relationship with demand. Implications and suggestions are provided with the findings of the study.