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Research paper

Title of Paper

Tourism specialization across qualities in Europe

Presenter Bios (50 Words)

Sylvain Petit is Associate Professor at the GDI department, University of French Polynesia, and associate researcher at IDP departement, University of valenciennes. He is member of the IATE (International Association for Tourism Economics) executive council. He is a specialist of international tourism and globalization by using quantitative methods such as econometrics estimation.

Abstract (150 Words)

Despite the significance of tourism in international trade today and its economic importance for host countries, there has been relatively little empirical research devoted to the study of international flows of tourism services or to tourism specialization. All existing papers consider tourism as a homogeneous product when analyzing international specialization and thus reinforce the stereotypical image of countries in the South as highly specialized in tourism services and countries in the North as highly specialized in other activities. This image is especially dominant for Europe (Mediterranean countries versus Northern countries).

However, tourism turns out to be a highly differentiated product, in particular regarding the dimension of quality. Many empirical works have stressed the strategic role of quality in a given tourism destination’s attractiveness. Others showed that European tourism flows are dominated by two-way trade (simultaneous exports and imports of tourism services between two countries) with a large predominance of vertical differentiation (i.e differences in quality). This suggests that the pattern of tourism specialization across countries may be, at least in Europe, much less simplistic than usually claimed: besides taking place between tourism and other sectors, international specialization may also take place in Europe within the tourism sector itself, along the spectrum of quality, with both Northern and Mediterranean countries specialized in tourism services of different quality levels.

Moreover, tourism specialization has been studied at a multilateral level (high level of geographic aggregation: one country with respect to the rest of the world or with respect to a group of country, e.g. France/the UE 28). This method conducts to a geographical aggregation bias. For example, a country can display comparative advantages with respect to N-1 partners but a large comparative disadvantage with the Nth partner. In this case, there is a possibility to have for results at a multilateral level, a revealed comparative advantage detected, whereas the reality with the bilateral observations is more complex.

In this paper, we examine tourism specialization patterns for a sample of 20 European countries over the period 2010-2013 by considering three different quality levels for tourism services (high, medium, low) and by using bilateral observations. Assuming that, in line with the literature, differences in quality can reasonably be proxied by differences in export unit values, the first step was to define such values for each bilateral tourism trade flow. We used the OECD database and a specific method for harmonizing mirrored data and correcting for the so-called Penn effect. The second step was to compare each tourism services export unit value to a sample norm in order to define three market segments: up-market, middle-market and down-market tourism services. We follow the method of Fontagné, Gaulier and Zignago (2008). After different simulation, we divide each flows in the three market segments. Lastly, revealed comparative advantages have been computed for each country and each segment using the “contribution to the trade balance” indicator (Lafay, 1992).

The results of this study are clear and unambiguous: specialization in tourism is unquestionably a much more subtle phenomenon in Europe than usually claimed. We compare the results of 4 analyses. In the first, tourism specialization is studied as the usual way so without the distinction of the ranges of quality and at a multilateral level. The second is done at the bilateral level without the distinction of the ranges of quality. The third analysis is realized along ranges of quality at the multilateral level. The last analysis take into account the different ranges of quality and the bilateral data. By comparing the results obtained with this 4 methods, we indicate how much a tourism specialization study realized at a multilateral level without the distinction of the market segments can conduct to some spurious and biased conclusions.

Tourism specialization takes place along ranges of quality, with most European countries positioned on different market segments. Even countries displaying a large global comparative disadvantage in tourism at the multilateral level have a comparative advantage in some segment. And conversely, countries having a large global comparative advantage in tourism always display comparative disadvantages in some segment.

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Tourism specialization across qualities in Europe

Despite the significance of tourism in international trade today and its economic importance for host countries, there has been relatively little empirical research devoted to the study of international flows of tourism services or to tourism specialization. All existing papers consider tourism as a homogeneous product when analyzing international specialization and thus reinforce the stereotypical image of countries in the South as highly specialized in tourism services and countries in the North as highly specialized in other activities. This image is especially dominant for Europe (Mediterranean countries versus Northern countries).

However, tourism turns out to be a highly differentiated product, in particular regarding the dimension of quality. Many empirical works have stressed the strategic role of quality in a given tourism destination’s attractiveness. Others showed that European tourism flows are dominated by two-way trade (simultaneous exports and imports of tourism services between two countries) with a large predominance of vertical differentiation (i.e differences in quality). This suggests that the pattern of tourism specialization across countries may be, at least in Europe, much less simplistic than usually claimed: besides taking place between tourism and other sectors, international specialization may also take place in Europe within the tourism sector itself, along the spectrum of quality, with both Northern and Mediterranean countries specialized in tourism services of different quality levels.

Moreover, tourism specialization has been studied at a multilateral level (high level of geographic aggregation: one country with respect to the rest of the world or with respect to a group of country, e.g. France/the UE 28). This method conducts to a geographical aggregation bias. For example, a country can display comparative advantages with respect to N-1 partners but a large comparative disadvantage with the Nth partner. In this case, there is a possibility to have for results at a multilateral level, a revealed comparative advantage detected, whereas the reality with the bilateral observations is more complex.

In this paper, we examine tourism specialization patterns for a sample of 20 European countries over the period 2010-2013 by considering three different quality levels for tourism services (high, medium, low) and by using bilateral observations. Assuming that, in line with the literature, differences in quality can reasonably be proxied by differences in export unit values, the first step was to define such values for each bilateral tourism trade flow. We used the OECD database and a specific method for harmonizing mirrored data and correcting for the so-called Penn effect. The second step was to compare each tourism services export unit value to a sample norm in order to define three market segments: up-market, middle-market and down-market tourism services. We follow the method of Fontagné, Gaulier and Zignago (2008). After different simulation, we divide each flows in the three market segments. Lastly, revealed comparative advantages have been computed for each country and each segment using the “contribution to the trade balance” indicator (Lafay, 1992).

The results of this study are clear and unambiguous: specialization in tourism is unquestionably a much more subtle phenomenon in Europe than usually claimed. We compare the results of 4 analyses. In the first, tourism specialization is studied as the usual way so without the distinction of the ranges of quality and at a multilateral level. The second is done at the bilateral level without the distinction of the ranges of quality. The third analysis is realized along ranges of quality at the multilateral level. The last analysis take into account the different ranges of quality and the bilateral data. By comparing the results obtained with this 4 methods, we indicate how much a tourism specialization study realized at a multilateral level without the distinction of the market segments can conduct to some spurious and biased conclusions.

Tourism specialization takes place along ranges of quality, with most European countries positioned on different market segments. Even countries displaying a large global comparative disadvantage in tourism at the multilateral level have a comparative advantage in some segment. And conversely, countries having a large global comparative advantage in tourism always display comparative disadvantages in some segment.