Journal of Sustainable Tourism

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Dynamic relationship between tourism, economic

growth, and environmental quality

Danish & Zhaohua Wang

To cite this article: Danish & Zhaohua Wang (2019): Dynamic relationship between
tourism, economic growth, and environmental quality, Journal of Sustainable Tourism, DOI:
10.1080/09669582.2018.1526293

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JOURNAL OF SUSTAINABLE TOURISM
https://doi.org/10.1080/09669582.2018.1526293

Dynamic relationship between tourism, economic growth,

and environmental quality
Danisha,b and Zhaohua Wanga,c,d,e,f
a
School of Management and Economics, Beijing Institute of Technology, Beijing, China; bSchool of
Economics and Trade, Guangdong University of Foreign Studies, Guangzhou, China; cCenter for Energy and
Environmental Policy Research, Beijing Institute of Technology, Beijing, China; dCollaborative Innovation
Center of Electric Vehicles in Beijing, Beijing, China; eBeijing Key Lab of Energy Economics and
Environmental Management, Beijing, China; fSustainable Development Research Institute for Economy and
Society of Beijing, Beijing, China

ABSTRACT ARTICLE HISTORY

In the recent era of globalisation, the tourism sector is growing rapidly Received 23 September 2017
and stimulates economic growth across the world, however, the inevit- Accepted 16 September 2018
able environmental consequences of tourism cannot be ignored. For
KEYWORDS
sustainable tourism, it is necessary to understand the interrelationship
BRICS countries; dynamic
between economic growth, tourism, and environmental quality. Hence, seemingly unrelated
the objective of the current research is to investigate the dynamic rela- regression; economic
tionship between tourism, economic growth, and CO2 emissions from growth;
1995 to 2014 in the context of BRICS economies. A group of economet- globalisation; tourism
ric tests robust to heterogeneity and cross-sectional dependence is
applied to achieve accurate and unbiased results. Empirical findings pro-
pose that tourism sector significantly encourages economic growth;
however, tourism degrades the quality of the environment. Also, global-
isation has a long-term relationship with economic growth but an insig-
nificant relationship with CO2 emissions. The long-term elasticities
further recommend that investment stimulate economic growth and
mitigate CO2 emissions. Moreover, environmental Kuznets curve (EKC)
holds in BRICS countries in its significance to tourism and globalisation.
Finally, a heterogeneous panel non-causality test detects bi-directional
causality between tourism receipts and CO2 emissions. Moreover, tour-
ism and investment in tourism Granger cause each other. Empirical find-
ings direct towards important policy implications.

Introduction
The United Nations nominated the year 2017 as the International Year of Sustainable Tourism.
The timing of this year offers a single opportunity for travel and tourism to be organised and to
address the challenges set out in the sustainable development goals (World Trade Tourism
Council, 2016). According to the World Tourism Organisation, tourism is now the biggest industry
globally. International tourism is considered key to a country’s economy. Over the last few deca-
des, the tourism sector has evolved as a sunlight industry and reckons itself among the largest
industries both in developing and developed nations (Paramati, Shahbaz, & Alam, 2017). The

CONTACT Zhaohua Wang [email protected] School of Management and Economics, Beijing Institute of
Technology, Beijing 100081, China
ß 2018 Informa UK Limited, trading as Taylor & Francis Group
2 D. KHATTAK AND Z. WANG

expansion of tourism is counted as a key sector for economic growth (Brida & Risso, 2009; Tang
& Tan, 2013).
Furthermore, through tourism, income is transferred from developed countries to developing
countries. Despite the positive role of tourism, it also impairs the quality of the environment:
however, development of international tourism and an increase in the number of international
tourists not only stimulate economic growth but increase energy consumption. Subsequently,
during tourism activities, energy is consumed directly from fossil fuel or indirectly from electricity
that comes from the production of oil, gas, and coal. Tourism activities are dependent on the
natural or anthropogenic environment, in addition to consumption of natural resources. Also, the
growth of tourism activities has environmental impacts related to resource extraction (Robaina-
Alves, Moutinho, & Costa, 2013). Tourism activities, transportation, catering, lodging, and the
management of tourist attractions bring about an increase in energy consumption due to vari-
ous functions that change the environment through different channels. The high amount of
energy consumption from fossil fuels and motorised vehicles emits greenhouse gases. The tour-
ism sector is also part-responsible for global warming. According to the UN’s World Tourism
Organisation (UNWTO), the tourism sector emits 5% of global carbon dioxide emissions (CO2)
and accounts for 4.6% of global warming. The adverse environmental impact of tourism leads to
researchers taking a variety of measures and developing the emerging concept of sustainable
tourism, even though tourism is very much related to the environment (Dogan & Aslan, 2017).
The BRICS (Brazil, Russia, India, China, and South Africa) countries are considered as major
tourism receipt countries. Among BRICS countries the tourism industry is undergoing rapid
development and consequences such as energy consumption and CO2 emissions are increasing.
The contribution of CO2 emissions from the tourism industry is increasing rapidly, indeed it is
7.88 times larger than it was in 1990. This growth in CO2 emissions from the tourism industry is
mostly due to transportation, responsible for more than 80% of total carbon emissions (Tang,
2015; Tang, Shang, Shi, Liu, & Bi, 2014). The whole world is now looking to the BRICS countries
because they have great potential to become world leaders, especially in tourism. Tourism, as a
sunrise industry, deserves attention, and thus offers many possibilities to make strong BRICS
economies competitive with the rest of the world (Datta, 2014). BRICS countries generate
employment, income for their populations, and expand economic activities through tourism
development, simultaneously tourism activities lead to poorer environmental quality (Banday &
Millia, 2017).
Although, a large number of studies, both empirically and theoretically, have argued that
tourism significantly contributes to CO2 emissions, in the current era of globalisation, measure-
ment of CO2 emissions from the tourism industry has attracted the attention of both scholars
and policymakers. Tourism development is recognised as a prominent contributor to climate
change, and a growing number of visitors faces anxieties about the environment at tourist desti-
nations (Hsieh, Tsai, & Chen, 2017; Qiao & Gao, 2017). Various activities are related to the tourism
industry and, as such, contribute about 5% to global CO2 emissions. Tourism either directly or
indirectly (positively or negatively) affects environmental quality (Katircioǧlu, 2014; Raza, Sharif,
Wong, & Karim, 2016). Mostly, accommodation, transportation, and other events linked to tour-
ism, consume energy derived from fossil fuels (WTO, 2014). Alongside the direct impact, tourism
also has enormous positive indirect effects by contributing to the balance of payments, improves
living standards, the accumulation of increase in the production of goods and services and
increases in government income in the form of benefits and taxes. Few studies have investigated
the ways in which tourism affects the environment indirectly being a key indicator of energy
consumption leading to global climate change (Katircioǧ lu, 2014; Katircioglu, Feridun, & Kilinc,
2014; Paramati et al., 2017; Sherafatian-Jahromi, Othman, Law, & Ismail, 2016).
Prior research studies regarding the relationship between tourism, economic growth, and CO2
emissions are limited to countries and years. For example, Robaina-Alves et al. (2013) employ
decomposition analysis in Portuguese tourism sector (Raza et al., 2016); conduct wavelet-based
 JOURNAL OF SUSTAINABLE TOURISM 3

analysis for the USA (Solarin, 2014); uses autoregressive distributed lag and a vector error correc-
tion model in Malaysia. Several studies have worked on the influence of tourism on CO2 emis-
sions in a panel framework. For instance, (Paramati, Alam, & Chen, 2017) evaluate the impact of
tourism on CO2 emissions in developing and developed countries. In the current scenario, coun-
tries around the globe are becoming aware of the significance of tourism and its share in GDP
growth. BRICS nations are considered to be the most significant emerging economies yet are
often overlooked in such literature; however, previous studies failed to consider investment in
tourism and globalisation in their models, because these factors can significantly contribute to
the development of the tourism industry. Also, the factor can significantly contribute to
mitigating pollution and can promote sustainable tourism (Paramati et al., 2017).
Considering the aforementioned limitations, the objective of this research is to investigate the
dynamic relationship between economic growth, tourism, and environmental quality controlling
the model for total investments in the tourism industry and globalisation index into a single
multivariate framework for BRICS economies.
The contributions of this study to previous work are threefold: (i) the present study is prob-
ably the first attempt to investigate the dynamic relationship between tourism, economic
growth, and environmental quality in the case of BRICS countries; (ii) important environment-
related factors are ignored in earlier studies and need to be incorporated. By adding these
potential factors, we produce reliable, consistent empirical results and also overcome the issue of
problem specification. Investments in the tourism industry and globalisation are important fac-
tors incorporated into the tourism and CO2 emissions nexus. These factors can considerably
reduce CO2 emissions and stimulate sustainable tourism. It would also be helpful for policy-
makers to formulate a comprehensive environmental policy for sustainable economic develop-
ment; (iii) earlier studies related to tourism and environmental nexuses have applied ordinary
least squares estimates (OLS), the fully modified ordinary least square (FMOLS) and dynamic
ordinary least square (DOLS) methods for panel data analysis; however, the results obtained from
these methods are biased and unreliable as these methods rely on the assumption of independ-
ent cross sections. Therefore, the current study advances earlier works in tourism-CO2 emission
literature by adopting the new developed econometric technique for long-term estimation for
the first time, namely by using dynamic seemingly unrelated cointegrating regressions (DSUR) as
developed by (Mark, Ogaki, & Sul, 2005). The application of this method produces accurate and
unbiased long-term estimates. Further, CIPS and CADF panel unit root tests are used to measure
the level of integration in those counter to the cross-sectional dependence in the panel data
(Pesaran, 2004). Panel heterogeneous causality (Dumitrescu & Hurlin, 2012) test that counter het-
erogeneity and cross-sectional dependence.
The remainder of the study is arranged as follows: Section 2 provides a review of previous
literature, Section 3 explains the model specification and data sources, Section 4 explains results
and discussion, and finally, Section 5 concludes the study.

Literature review
The economic, social, and environmental consequences of tourism cannot be ignored, however,
it is important to understand the dynamic relationship between economic growth, tourism, and
CO2 emissions. Above all, tourism positively contributes to economic growth; however adverse
environmental consequences of tourism cannot be ignored. Prior studies precisely examine the
relationship between tourism and economic growth and environmental quality, such as CO2
emissions. This section divides prior studies into three sub-sections: (i) studies on determinants
of CO2 emissions and the environmental Kuznets curve (EKC); (ii) the relationship between tour-
ism and economic growth; and (iii) the relationship between tourism and CO2 emissions.
4 D. KHATTAK AND Z. WANG

EKC hypothesis
Several studies have investigated the nexus between energy-growth and CO2 emissions in differ-
ent region around the world (Anatasia, 2015; Kalayci & Koksal, 2015; Kapusuzoglu, 2014;

lu, Fethi, Kalmaz, &
Katircioglu, Fethi, Kalmaz, Çaglar, & Taşpinar, 2014; Katircioǧlu, 2014; Katırcıog

lar, 2016). For instance, (Al-Mulali, Ozturk, & Lean, 2015) and (Dogan & Seker, 2016b) examine
Çag
the determinant of CO2 emissions in European Union (EU) countries. In another study, (Dogan &
Seker, 2016c) evaluate the determinants of CO2 emissions for top renewable countries.
Furthermore, (Paramati, Sinha, & Dogan, 2017) estimate the long-term relationship between
renewable energy, economic output, and environmental protection. For OECD countries the vari-
ous determinants of CO2 emissions are analysed (Dogan & Seker, 2016a; Shafiei & Salim, 2014).
For a panel of biomass countries (Dogan & Inglesi Lotz, 2017) analyse the effects of real income
and biomass energy on CO2 emissions. Among all determinants, several studies have investi-
gated the nexus between growth and CO2 emissions; more particularly the EKC hypothesis is
widely discussed. For instance, (Jebli, Youssef, & Ozturk, 2016) tests the EKC in OECD countries.
Heidari, Katirciog
lu, & Saeidpour (2015) validate the EKC in ASEAN countries. Katirciog
lu &
Taşpinar (2017) suggest that the ECK applies in Turkey given the significance of financial devel-
opment therein. In another study, Katirciog
lu & Katirciog
lu (2017) conclude that the EKC does
not hold in the presence of urban development.

Tourism and growth

The relationship between economic growth and tourism has been debated for many years. This
relationship is built on tourism economic theory which argues that the tourism-led growth
hypothesis means that tourism enhances economic growth and other externalities. Time series,
panel, and cross-sectional data analysis have been undertaken for the tourism-growth nexus.
There are a considerable number of studies focussing on the role of tourism in economic
growth. Existing studies on the relationship between tourism and growth are divided into four
strands: first, the tourism-led growth hypothesis suggests that tourism Granger cause economic
growth. For instance, several studies empirically support the tourism-led growth hypothesis
(Katircioglu, 2009; Panahi, Mamipour, & Nazari, 2015).
Recently, Paramati, Shahbaz, & Alam (2017) confirm that tourism enriches economic growth in
EU countries. Second, bidirectional causality is detected between tourism and economic growth
in various countries. Furthermore, the tourism-led growth hypothesis is confirmed in Malta,
Singapore, and Turkey (Katircioglu, 2009; Katircioglu, 2010; Katircioglu, 2010; Turan & Glu, 2011).
For instance, bi-directional causality is suggested between tourism and economic growth. This
feedback hypothesis is supported by several studies (e.g., Schubert, Brida, & Risso, 2011) in
Antigua and Barbuda; and (Apergis & Payne, 2012) in nine Caribbean countries. Third, earlier
work addressed the hypothesis that economic growth also stimulates tourism. Likewise, (Cortes-
Jimenez, Nowak, & Sahli, 2011) supports tourism-led growth hypothesis in Tunisia. Lastly, few
studies have observed non-causality between tourism and economic growth. Such as
(Ekanayake, 2012) found no causality in 140 developing countries and (Chou, 2013) confirm the
neutrality hypothesis in transition economies.

Tourism and CO2 emissions

The measurement of CO2 emissions from the tourism sector appeals to scholars. The literature is
divided into two schools of thought regarding the role of tourism development in CO2 emis-
sions. One group has argued tourism has a direct impact on CO2 emissions. Likewise, Katircioglu
(2014) confirm the long- and short-term relationships between tourism and CO2 emissions in
Turkey. Empirical findings suggest that tourism accelerates the rate of CO2 emissions. Ragab &
 JOURNAL OF SUSTAINABLE TOURISM 5

Meis (2016) concludes that the value-added from tourism directly emits 464.3 tons of CO2 emis-
sions. Saenz-de-Miera & Rossello  (2014) describe the relationship between tourists and air pollu-
tion in Mallorca (Spain). Using a wavelet-based approach, Raza et al., (2016) conclude that
tourism, and its development, has significantly contributed to environmental degradation in the
USA. Solarin (2014) concludes that tourist arrival; real GDP, energy consumption, financial devel-
opment, and urbanisation Granger cause CO2 emissions. Also, tourism adversely influences envir-
onmental quality in both developing, and developed, countries (Leo n, Arana, & Hernandez

Aleman, 2014; Robaina-Alves et al., 2013).
Furthermore, (Al-Mulali, Fereidouni, & Mohammed, 2015) decide that tourism may mitigate
the level of CO2 emissions despite EU countries having strict environmental regulations. Another
group find that tourism indirectly affects CO2 emission. For instance, (Lee & Brahmasrene, 2013)
concludes that tourism stimulates economic growth but help to reduce CO2 emissions. Salih
Turan Katircioglu et al. (2014) inspected the relationship between energy demand, tourism indi-
cators, and carbon emissions in the context of Cyprus. Results found that tourism has a positive
impact on energy demand and CO2 emissions. Also, de Vita, Katircioglu, Altinay, Fethi, & Mercan
(2015) support the EKC hypothesis in Turkey especially given the significance of tourism therein.
Overall from the tourism – CO2 emissions literature, it has been observed that these studies
have failed to consider some potential areas which need further investigation. For example,
Paramati, Shahbaz, & Alam (2017) highlight that investment in the tourism industry and global-
isation are significant factors which can considerably lessen CO2 emissions and may stimulate
sustainable tourism. To fill the existing gap, the current study contributes to the literature of
energy economics by examining the dynamic relationship between tourism, economic growth,
and CO2 emissions by adding investment and globalisation to a single multivariate framework.
This study is first of its kind which focuses on tourism-led growth relationship, and it effects on
CO2 emissions for BRICS countries.

Model specification and data source

Model specification
This empirical work aims to investigate the dynamic relationship between tourism, economic
growth, and CO2 emissions controlling the model for globalisation and investment in tourism
sector using the sample of BRICS economies. The empirical analysis of this study is divided into
two models; in the first model, economic growth is taken as the dependent variable. In the
second model, the CO2 emissions are considered as the dependent variable based on the exist-
ing theoretical approach (Lee & Brahmasrene, 2013; Paramati, Shahbaz, & Alam, 2017).
The following tourism-led growth hypothesis models are developed:
log GDPit ¼ b0 þ b1 ðlog TRit Þ þ b2 ðlog INVit Þ þ b3 ðlog GLOBit Þ þ x0 (3.1)
where GDP shows economic growth per capita; TR means a total number of tourism receipts;
INV indicates investment in the tourism sector and GLOB means globalisation. Subscripts i and t
indicate a number of countries and period, respectively. In the next phase, the effect of tourism
on CO2 emissions is examined. To extend the model of Paramati, Shahbaz, & Alam (2017) global-
ization and investment in tourism is added.
The econometric form of eq. (3.2) is given below:


^
logðCO2 Þit ¼ b0 þ b1 logðGDPit Þ þ b2 log GDP2 it þ b3 ð log TRit Þ þ b4 ð log INVit Þ (3.2)
þb5 ð log GLOBit Þ þ x0
where CO2 is the emission of CO2 per capita, GDP reflects economic growth; tourism means a
total number of receipts from tourism. INV means total investment in tourism, and GLOB repre-
sents globalisation, t denotes the number of the period, and i denotes the number of countries.
6 D. KHATTAK AND Z. WANG

Table 1. Variable name, symbol, definition, and data source.

Variable name Symbol Definition Unit Source
Carbon dioxide emission CO2 CO2 emissions are calculated Metric tons per capita World Bank
as the emissions of CO2
from the burning of
fossil fuels
Globalization GLOB The globalization index Index KOF index
comprises of three sub-
indices economic
globalization, social
globalization and political
globalization
Economic growth GDP Gross domestic product Real per capita GDP in World Bank
(Real per capita GDP in 2010 $ US
2010 $ US) is used for
calculation of
economic growth
Tourism receipts TR Tourism is calculated as Current U.S. dollars World Bank
international tourism
receipts are expenditures.
These receipts contain
any other prepayment
made for goods or
services received in the
destination country
Investment in tourism INV Investment means total Current U.S. dollars World Trade Tourism
investments in the council, (2016)
tourism industry

Also, if b1 > 0 and b2 < 0 it suggests that the ECK holds in BRICS countries. The EKC hypothesis
states that with an increase in income the level of CO2 emissions increases until incomes reach
their threshold level.

Data source
This study uses a cross-sectional panel of BRICS economies for the years 1995–2014 based on
the availability of data. CO2 emissions are calculated as the emission of CO2 from combustion of
fossil fuels. The data on globalisation index is sampled from the KOF index (Dreher, 2006), the
globalisation index comprises three sub-indices: economic globalisation, social globalisation, and
political globalisation. The choice of variable is based on prior studies (Paramati, Shahbaz, &
Alam., 2017). Economic growth is taken as a gross domestic product (real per capita GDP in 2010
USD) divided by mid-year population. Tourism is calculated as international tourism receipts.
These receipts contain any other prepayment made for goods or services received in the destin-
ation country and data are in current U.S. dollars (USD). Investment means total investments in
the tourism industry USD in billion (real prices). The data for tourism receipts, GDP, and CO2
emissions are gathered from the World Development Indicator database (WDI, 2015). The data
for investment in tourism is recovered from the website of world travel and tourism council on-
line database (World Trade Tourism council, 2016). To normalise the data is a key step before
applying any regression technique. For that purpose, firstly all the variables are converted into
an equal unit of measurement. The series is divided by total population to convert the data into
per capita terms. Given that the variables of interest are expressed in logarithmic form, so the
estimated value of the long-term can be interpreted as long-term elasticities. The summary of
variables is provided in Table 1.
According to the descriptive statistics indicated in Table 2, the highest per capita CO2 emis-
sions are in South Africa whereas the lowest per capita carbon emissions are in India. Moreover,
the largest GDP per capita is in Russia (8617.701 USD), and the smallest GDP per capita is in
 JOURNAL OF SUSTAINABLE TOURISM 7

Table 2. Results of descriptive statistics

Countries Descriptive statistics GDP CO2 TR INV
Brazil Mean 9770.18 1.93432 19.82505 83.72019
Std. deviation 1217.19 0.22099 10.73771 14.07972
Minimum 8523.86 1.58733 4.500822 47.20382
Maximum 11,796.2 2.46587 35.93301 106.2121
China Mean 3080.48 4.580115 24.49966 50.17829
Std. deviation 1584.16 1.879251 16.09514 26.30828
Minimum 1227.55 2.648649 7.245685 17.37222
Maximum 6108.23 7.553177 77.24277 89.38599
India Mean 1028.5 1.170434 7.420712 12.91215
Std. deviation 322.84 0.275622 4.780155 9.174548
Minimum 628.862 0.844607 2.687134 3.571352
Maximum 1642.72 1.734739 16.02419 30.29321
Russia Mean 8617.70 11.2593 69.84395 30.49448
Std. deviation 2303.79 0.74360 38.9986 12.79065
Minimum 5505.62 10.1273 23.39073 12.6515
Maximum 11,615.7 12.8183 140.7458 48.32011
South Africa Mean 6661.17 8.88089 142.8564 62.78303
Std. deviation 756.244 0.64125 59.0446 24.71167
Minimum 5617.50 7.621697 64.0648 27.82594
Maximum 7610.72 10.04072 213.345 107.0404
Note: GDP ¼ Gross domestic product proxy for economic growth; CO2 ¼ carbon dioxide emissions; TR ¼ Tourism receipts;
INV ¼ investment in tourism

India (1028.54 USD). The highest value of tourism is in Brazil (83.72019 billion USD) whereas the
low value of the investment is in India (12.91215 billion USD). Regarding tourism receipts, the
highest tourism receipts are collected by South Africa (142.8564 thousand dollars) and lowest by
India (7.420712 thousand dollars).

Analysis and discussion

This section explains the econometric strategy and estimation of results. First, to realise the
nature of the panel data, the cross-sectional dependence (CD) is checked by using a CD test as
recommended (Pesaran, 2004). Second, for an order of integration panel unit test is applied,
which they serve the purpose to check whether, or not, the series is stationary. Next for cointe-
gration between analysed variables, a panel cointegration test (Westerlund, 2007) is used. For
long-term estimation, a DSUR approach is used which allows heterogeneity and cross-sectional
dependence. Lastly, the heterogeneous panel causality test is used to detect the direction of
causality among underlying variables.

Cross-sectional dependence and panel unit root test

It is well known that the economic variables are non-stationary and the presence of non-station-
ary data leads to meaningless results, so it is important to check the level of stationarity for
underlying variables. Before applying unit root tests, this empirical work first applies (Pesaran,
2004) a test to check the existence of cross-sectional dependence (CD) in the panel data:
because to ignore the issue of CD may give biased results and forecasting errors. The results of
the CD test are shown in Table 3 which suggests that there exists strong evidence to reject the
null hypothesis of cross-sectional dependence due to a p value of less than .01. Consequently,
results providing proof of the existence of cross-sectional dependence for carbon dioxide emis-
sions (CO2), economic growth (GDP), tourism receipts (TR), globalisation (GLOB), and investment
in tourism (INV) are discussed.
The next step is to check the stationarity of the underlying variable. This empirical study pre-
fers the application of CIPS and CADF unit root tests instead of using Levin Lin Chu test Fisher
8 D. KHATTAK AND Z. WANG

Table 3. Results of Pesaran CD, Pesaran scaled LM, CIPS, and CADF panel unit root tests.
Results of cross-sectional dependence
Pesaran scaled LM Pesaran CD
Variables Statistic Probability Statistic Probability
CO2 12.850 0.0000 6.6542 0.0000
GDP 11.431 0.0000 7.3125 0.0000
GLOB 26.458 0.0000 11.291 0.0000
INV 9.5464 0.0000 3.1051 0.0000
TR 9.2937 0.0000 3.7024 0.0002
Results of CIPS and CADF panel unit root tests
CIPS CADF
Regressor Level First difference Level First difference
CO2 –2.201 3.659a –2.078 –2.925
GDP –2.287 –3.184a –1.763 –2.34
GLOB –2.155 –3.594a –2.904 –3.678
INV –3.161 –4.506a –3.22 –3.163
TR –2.798 –4.653a –3.078 –4.026
Note: GDP ¼ Gross domestic product proxy for economic growth; CO2 ¼ carbon dioxide emissions; TR ¼ Tourism receipts;
INV ¼ investment in tourism
a
Significant at 1%.
b
Significant at 5%.
c
Significant at 10%.

ADF, Fisher PP, Breitung, and Hadri tests because the latter fails to account for the problem of
homogeneity. As BRICS economies have a significant difference in investment, globalisation level,
and tourism, the second group of unit root tests such as CIPS and CADF is suitable for this study.
The results of CIPS and CADF panel unit root tests are given in Table 3, and they reveal that the
null hypothesis of no stationarity is not rejected at the level, but at first difference.

Panel cointegration test

This study seeks for possible cointegration between the variables of consideration. Several coin-
tegrations suggested in the literature such as the Fisher-Johnson panel cointegration and the
Pedroni, or Kao panel cointegration tests; however, the CD test suggests cross-sectional depend-
ence as estimated in Table 3, therefore to counter the issue of cross-sectional dependence this
study uses the Westerlund panel cointegration test (Westerlund, 2007). The calculation of
Westerlund panel cointegration test is based on group statistics (Gs, Ga) and panel statistics (Ps,
Pa). Panel statistic pooling information from error correlation mechanisms along with cross-sec-
tional units are used: group statistics do not rely on information for error correction terms.
Results from Table 4 present strong evidence for the long-term relationship between analysed
variables as the null hypothesis of no cointegration is rejected.

Panel long-term estimation

Once one confirms the cointegration, the next step is to estimate long-term coefficients. Earlier
studies related to tourism and environmental nexus have applied the ordinary least squares esti-
mates (DOLS) and the FMOLS; however, the estimates produced from use of FMOLS and DOLS
are unreliable and biased as these methods are based on the assumption of independent cross
sections (Danish, Saud, Baloch, & Lodhi, 2018; Dogan & Seker, 2016a). The issue of cross-sectional
dependence is observed in Table 3 and thus restricts the use of FMOLS and DOLS methods.
Therefore the application of long-term estimation method is required that can account for the
issue of heterogeneity. Hence, a second-generation long-term estimator, namely the DSUR is pre-
ferred. The DSUR estimator is a good predictor, is consistent and asymptotically normal
 JOURNAL OF SUSTAINABLE TOURISM 9

Table 4. Results of Westerlund Panel cointegration test.

Dependent variable ¼ economic growth Dependant variable ¼ CO2 emissions
Test Value Z value p value Value Z value p value
Group-Ʈ –4.394a –3.773 .000 –2.534 –1.801 .036b
Group-a –0.846 4.272 1.000 –3.604 1.506 .934
Panel-Ʈ –2.913 2.965 .999 –5.188 –1.712 .044b
Panel-a –0.670 3.433 1.000 –3.922 0.123 .549
a
Significance level at 1%.
b
Significance level of 5%.

Table 5. Results of dynamic seemingly unrelated regression (DSUR).

Dependant variable ¼ economic growth Dependant variable ¼ CO2 emissions
Regressor Co-efficient t value Prob. Regressor Co-efficient t value Prob.
TR 0.1594 2.70 0.0308 GDP 8.4507a 8.66 0.000
INV 0.4152a 6.18 0.000 GDP2 –1.1425a –8.48 0.000
GLOB 3.1821a 6.01 0.000 TR 0.5313a 13.00 0.000
Constant –2.6923a –3.20 0.002 INV –0.5771a –9.84 0.000
GLOB 0.3966 0.93 0.354
Constant –15.416a –9.19 0.000
a
Level of rejection at 1%.

distributed. Results from the DSUR estimator are reported in Table 5, and it is evident that tour-
ism receipts stimulate economic growth and degrade environmental quality in BRICS countries.
 1% " Tourism ! 0.1594 " economic growth and 8.4507 " CO2 emissions
A 1% increase in a number of tourism receipts enhances economic growth by 0.1594%. The
strong magnitude of the estimated parameter indicates the existence of important long-term
multiplier effects. According to Ricardo’s comparative advantage, countries can gain by expand-
ing tourism services rich in tourism resources. In countries specialising in the tourism industry,
tourism growth can expand the positive net tourism revenues, leading to more economic
growth. The finding of the study supports tourism-led growth hypothesis, and results are line
with previous studies (Chiu & Yeh, 2017; De Vita & Kyaw, 2017; Fawaz, Rahnama, & Stout, 2014;
Panahi et al., 2015).
Moreover, the environmental impact of tourism recipients is also noted in Table 5. A 1%
increase in tourism receipts leads to increase 0.5313% in CO2 emissions. In other words, tourism
receipts lead to a significant increase in environmental quality in BRICS countries. Possible rea-
sons are prepayment made on consumption of goods and services received in tourist destination
countries are not environmentally friendly: for example, transportation activities associated with
tourism consume a huge amount of energy coming from the combustion of fossil fuels and the
consequential effect of greenhouse gas emissions is observed. Also, it is noted that hotels in
tourist destinations contribute millions of tons of CO2 emissions annually due to wasteful practi-
ces and unwise eco-behaviours among guests. The tourism sector in BRICS countries should
increase public awareness programmes for new tourist arrivals. The accommodation and passen-
ger transport equipment, as well as the restaurant systems, need revision. Transportation regula-
tions are suggested to fit the context of the BRICS region so that they can limit the
environmental damage caused by transportation in tourism. Tourism is stimulating economic
growth although the environmental consequences have been ignored in BRICS countries. The
policies regarding tourism in BRICS countries are not well managed. Likewise, the Russian
Tourism Board needs to focus on promoting green tourism, as the emerging practice of tourism
to come around climate change and emphasise the significance of environmental issues to make
Russia a green tourism destination. Also, China works hard advancing statesman Deng Xiaoping’s
theories on the economic importance of tourism in the long-term. To boost the tourism industry
in the country, China adopted and documented rules and regulations to facilitate healthy
10 D. KHATTAK AND Z. WANG

development in the tourism sector. South Africa has embraced development strategies to lend a
hand tourism business to realise its full potential. India acknowledged the true potential of tour-
ism and national policies intended to endorse India as a major tourist destination. The Federal
Government of Brazil established a national tourism policy for advertising and the development
of tourism in Brazil (Datta, 2014). The results are in line with (De Vita & Kyaw, 2017; Lee &
Brahmasrene, 2013; Paramati, Shahbaz, & Alam, 2017). Despite the similarity in the results, the
findings of the empirical work are more reliable for the reason of using more advanced paned
data estimation approach that counters the issue of CD and heterogeneity.
Moreover, the elasticity of CO2 emissions concerning the non-linear effect of economic growth
is observed. The impact of GDP on CO2 emissions is positive, and the impact of the square of
GDP on CO2 emissions is negative. This implies that, after reaching an optimum level of eco-
nomic growth, this mitigates the level of CO2 emissions. In the early stage of economic develop-
ment the level of CO2 emissions increase, however, it crosses the threshold level of income and
CO2 emissions start to decline in BRICS countries. Thus the inverted U-shaped EKC is validated
for BRICS countries. The findings are supported elsewhere (Danish, Zhang, Wang, & Wang, 2017a,
2017b; Katirciog
lu & Katirciog

lu, 2017; Katircioǧlu, 2014).
The effect of investment in tourism has a positive and significant impact on economic growth
and mitigates the level of CO2 emissions.
 1% " investment in Tourism ! 0.4152 " economic growth and –0.5771 # CO2 emissions
A 1% increase in the investment in tourism stimulates economic growth by 0.41%. This
implies that investment tourism is a sunrise industry in BRICS countries and stimulates economic
growth. Also, the environmental impact of investment in tourism mitigates CO2 emissions. A 1%
increase in investment in tourism lowers CO2 emissions by 0.5771%. The empirical findings sug-
gest that investment in tourism stimulates economic growth and improves environmental quality
in BRICS countries. BRICS countries should continue to regulate the current policies of invest-
ment that are necessary for achieving sustainable tourism. For instance, India is the third largest
CO2 emitter in the world, and its investment in tourism is among the lowest which can be
observed from the preliminary analysis. The same is the case in China as it the largest CO2 emit-
ter in the world. The implication of these results suggests that both India and China need to
invest more in the tourism sector. Moreover, Brazil is the highest investor in tourism among the
BRICS countries. The GDP growth per capita in Brazil is also among the highest in the BRICS
countries as observed from the preliminary analysis. This recommends that the tourism sector
stimulates economic growth in the country which sets a good example for the rest of the
BRICS economies.
Results show that globalisation is positively, and significantly correlated, with economic
growth across BRICS countries. This recommends that acceleration in globalisation stimulates
economic growth. The reason may be that BRICS countries are taking full advantage of globalisa-
tion and trade to boost their economies. The finding is supported by (Salifou & Haq, 2016) who
confirmed the positive effect of physical capital, tourism and economic globalisation index on
economic growth. The results are also consistent with findings of (Gurgul & Lach, 2014) who con-
cluded that, in the first two decades of transition, globalisation has a positive impact on the eco-
nomic growth of the Central and Eastern European (CEE) economies due to the growth of
international trade and foreign investment, the reduction of import barriers, and the formulation
of taxation policies; however, the environmental impact of globalisation is negligible due to the
insignificant relationship between tourism and CO2 emissions as suggested by econometric esti-
mations in the present study.
The results can be summarised to show that the overall tourism sector is stimulating eco-
nomic growth and hold the EKC hypothesis that indirectly contributes to lower CO2 emissions:
however, a direct environmental consequence of tourism cannot be ignored. The transportation
in tourism, unawareness among people, lack of disposal facilities for waste, and hotel practices
in tourist destinations are the main reasons for the degradation of environmental quality in
 JOURNAL OF SUSTAINABLE TOURISM 11

Table 6. Dumitrescu and Hurlin heterogeneous panel causality test.

Null hypothesis W-Stat. Zbar-Stat. Prob.
GDP ! CO2 4.6176 4.2998a 0.0000
CO2 ! GDP 1.9271 0.9705 0.3318
GLOB ! CO2 2.1132 1.2007 0.2299
CO2 ! GLOB 0.3008 –1.0419 0.2974
INV ! CO2 1.4815 0.4190 0.6752
CO2 ! INV 1.9684 1.0215 0.3070
TR ! CO2 4.3087 3.9175a 0.0000
CO2 ! TR 3.7163 3.1845a 0.0014
GLOB ! GDP 4.7981 4.5231a 0.0000
GDP ! GLOB 1.1685 0.0318 0.9746
INV ! GDP 2.0997 1.1840 0.2364
GDP ! INV 3.4513 2.8566a 0.0043
TR ! GDP 4.5638 4.2332a 0.0000
GDP ! TR 4.2528 3.8483a 0.0001
INV ! GLOB 0.9728 –0.2104 0.8333
GLOB ! INV 1.8300 0.8504 0.3951
TR ! GLOB 2.5462 1.7366c 0.0825
GLOB ! TR 5.5119 5.4065a 0.0000
TR ! INV 9.0049 9.7288a 0.0000
INV ! TR 2.6916 1.9165c 0.0553
a
Significant at 1%.
b
Significant at 5%.
c
Significant at 10%.

BRICS countries. The consumption of fossil fuel should be replaced with a renewable source of
energy converting the transportation system towards green transportation. Hotels produce a
huge amount of waste that threatens human health; it should be controlled by regulating with
effective policy measures. On the other hand, investment in tourism is a good sign for BRICS
economies. The findings offer support in favour of the argument that BRICS countries should
promote their investment in the tourism sector without being significantly concerned about its
environmental consequences. Moreover, globalisation means interaction among countries in
term of trade and investment and is not a threat to environmental quality in the case of
BRICS countries.

Heterogeneous panel non-causality analysis

To reveal the causal relationship among tourism receipts, globalisation, economic growth, invest-
ment in tourism, and CO2 emissions the study uses heterogeneous panel causality (Dumitrescu &
Hurlin, 2012). This causality test permits for heterogeneity of the dynamic models across the
cross-sections and applies it under VAR criteria based on fixed coefficients. For both the null and
alternative hypotheses, the VAR models permit a divergent lag structure for different cross-sec-
tions along with heterogeneous unconstrained coefficients. The Wald statistics estimates Granger
non-causality for all cross-sections separately. This test gives a more accurate and robust causal-
ity estimate comparing with traditional causality approaches. The key assumption of the panel
non-causality method is that underlying variables must be stationary; consequently, we employ
the first difference of the series.
For the outcome from heterogeneous panel non-causality analysis the reader is referred to
Table 6. The results confirm that economic growth Granger-causes CO2 emissions in BRICS coun-
tries. Feedback is suggested between tourism and CO2 emissions. Globalisation Granger causes
economic growth in BRICS countries. Also, GDP growth causes investment in tourism and tour-
ism receipts. Furthermore, tourism and globalisation Granger cause each other and bi-directional
correlation is observed between tourism receipts and investment. To conclude, the short-term
heterogeneous panel non-causality test results proposed feedback hypothesis that tourism and
globalisation emissions Granger cause each other in BRICS countries. The higher the degree of
12 D. KHATTAK AND Z. WANG

globalisation, the higher the level of tourism receipts. GDP increases cause investment in tourism
meaning that the higher the GDP the bigger the investment in tourism. Finally, tourism receipt
and investment tourism Granger cause each other. It may be concluded that tourism receipts
increase with an increase in investment in tourism, also tourism receipts attracted investment in
tourism in the case of BRICS countries. Lastly, bi-directional causality is detected between eco-
nomic growth and tourism and the same results are obtained by (Katircioglu, 2009) for Turkey
and (Nissan, Galindo, & Mendez, 2011) for 11 other countries.

Conclusion
The objective of the present research work is to analyse the effect of tourism on economic
growth and CO2 emissions by incorporating the role of globalisation and investment in tourism
in the context of BRICS economies from 1995 to 2014 applying Panel estimation method robust
to cross-sectional dependence and heterogeneity.

Main findings
Results from the DSUR estimator, reveal some interesting findings.

 Investment in tourism enhances economic growth and mitigates the level of CO2 emissions.
 The tourism sector stimulates economic growth but impairs environmental quality.
 Globalisation has shown an increasing impact on economic growth however the effect of
globalisation on CO2 emissions is insignificant.
 The presence of the EKC is confirmed in the significance of investment in tourism.
 Bi-directional causality is detected between tourism receipts and CO2 emissions. Tourism and
economic growth Granger cause each other. Bi-directional causality is detected between glo-
balisation and tourism.
 Finally, tourism receipts and investment in tourism Granger cause each other.

Policy implications and future direction

Regarding the policy implication, the governments in BRICS countries are suggested to launch
more energy efficient green transportation schemes and green mass bus transit projects in high-
density tourist destinations. Promoting green tourism through print and electronic media is a
sensible choice for climate change and would resolve certain environmental issues. BRICS coun-
tries need to launch public awareness schemes via internet, television, and signage to send a
positive message to their people and international tourists about how to keep tourist destina-
tions in their countries clean and environmentally friendly. Mostly, the waste coming from hotels
and dumping of waste in tourism destinations are major causes of degradation of environmental
quality. These wastes are hazardous to human health and a threat to wildlife. Higher taxes and
carbon pricing should be imposed on hoteliers that produce most waste, and proper waste col-
lection measures are also therefore required.
The following policy implications regarding the expected role of globalisation in environmen-
tal quality are suggested: trade openness and FDI foster and stimulate market integration with
trade partners by lowering trade barriers which contribute positively to economic growth. On
the other hand, outdated technology may also be transferred through trade openness to the dis-
benefit of environmental quality in these countries. It is suggested that the BRICS countries
should focus on transfer of clean technology through trade openness and FDI. Helping them to
import more environmentally friendly technologies and disseminating information on better
 JOURNAL OF SUSTAINABLE TOURISM 13

environmental regulations and standards, globalisation helps reduce pollution caused by local
communities.
Despite these significant findings, this study has some limitations: of course, cultures have dif-
ferent priorities, for example, political influences and institutional variables that may influence
the tourism-led growth hypothesis and its nexus with environmental quality. These factors need
to be considered in future work as they can significantly mitigate the level of pollution. Also, this
study uses data from 1995 to 2014 due to available data pertaining to investment in tourism
from 1995, so use of recent data is likely to produce better results that are expected to poten-
tially be more comfortably tied to the discussion on policy implications.

Acknowledgment
We are thankful to the editor in chief and anonymous reviewers for their constructive comments that enhance the
presentation of the paper. This study is supported by the National Science Fund for Distinguished Young Scholars
(Reference No. 71625003), Yangtze River Distinguished Professor of MOE, National Key Research and Development
Program of China (Reference No. 2016YFA0602504), National Natural Science Foundation of China (Reference No.
91746208, 71573016, 71403021,71521002, 71774014), Humanities and Social science Fund of Ministry of Education
of China (Reference No. 17YJC630145), China Postdoctoral Science Foundation (Reference No. 2017M620648).

Disclosure statement
No potential conflict of interest was reported by the authors.

Notes on contributors
Danish is an associate professor at School of trade and economics, Guangdong University of foreign studies,
Guangzhou china. He have completed Ph.D. degree in Business administration from the school management and
economics, Beijing institute of technology Beijing (China). He is published several article in well reputed journal,
Renewable and Sustainable Energy Reviews, Energy, Journal of cleaner production, and Energy Economics and
Natural Hazards. His research interest are in the field of energy economic, econometric modelling and cli-
mate change.
Zhaohua Wang, Ph.D, professor and Doctoral Advisor of School of Management & Economics, Beijing Institute of
Technology. He has been engaged in post-doctoral research work in Tsinghua University. Owing to his outstanding
efforts in research work, he gained the chance in the program of "Beijing-funded Plan for Talents"," Funding
Scheme for outstanding young teachers in Beijing Institute of Technology and “Program for New Century Excellent
Talents in University” by MOE. He is the author of more than 90 research article and published several books. His
research interests are in Energy and Environmental Management, Green Supply Chain and Reverse Logistics
Management, Climate Change, Technical Innovation and Strategy. He has published paper in several high quality
SCI and SCCI journals, Energy Economics, Energy, Applied Energy, Journal of cleaner production, Ecological
Indicator, Renewable and sustainable energy review, Natural Hazards and many more.

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