Paper Title
Wealth Effect and Demand for Outbound Tourism
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
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.