The Comparison of the Determinants for Two Flows:

Tourism Demand and Remittance by Immigrants in Small Islands of Pacific Region

Abstract

    This paper aims at analyzing and comparing the difference between two flows; 1) the tourism flow shown as tourism demand, and 2) the remittance flow by immigrants. The study focuses on the small islands in the Pacific region since the issue of the migration and remittance are keys of the economy in this region as the MIRAB economic model indicates. In addition many of island regions are dependent upon international trade for their economic structure. Tourism, as one of the service trade, is especially significant for their economies. On the other hand, these flow data surrounding the island economy have many zero flows compared with the developed countries, and since the number of samples is small, few analysis using the econometric method have been done as yet. In this paper, the gravity equation is applied to show the determinants of the two flows respectively with consideration of the zero-flow data.
    As a result, basal variables in the gravity equation such as income, market size and distance effect are similar tendencies in both flows. In particular, income on both the origin and destination sides and distance effects show elasticity while market size on both sides is inelastic, although all of variables are significant. Meanwhile, price effect, and colonial and language relationships respectively, show the differences between the two flows. The coefficients of remittance flow are indicated higher than tourism flow in these variables. Moreover, this paper carried out the selection of the variables to seek the best model with AIC. The result shows both model were selected with the same variables to explain the flows.
    This paper concludes that it is necessary to take account of both relationship between tourism demand and migration issues in considering the island economies since the result shows a similar tendency between two flows.