The Employment Effect of Tourism: A Dynamic Analysis

ABSTRACT: The tourism industry can bring various positive economic developments on Gross Domestic Product, employment opportunities, national income and international trade throughout the economy. In recent years, the tourism industry has attracted the attention of most governments including the Sri Lankan government as the most promising sector to be a potential tool for generating income and employment. In this line, it has proficient to create both direct and indirect employment for skilled workers and unskilled workers as well. This study attempts to investigate the relationship between tourism and employment creation in Sri Lankaduring the period of 1977-2017by employingeconometric techniques namely the Johansen cointegration test, Vector AutoRegressive (VAR) analysis, and Granger-causality test. Johansen Cointegration test was used to find the longterm association between tourism and employment creation and found that the absence of a long-run relationship between two indicating tourism would not determine the employment creation in the long-term. Furthermore, the Granger causality test was employed for investigating the short-term relationship and it confirmed the existence of unidirectional causality between tourism and employment creation showing that the tourism industry of Sri Lanka would lead to employment generation in the short term.
KEYWORDS: Employment creation, Granger causality tests, Tourism, Vector Auto Regressive