The paper proposes a resource curse hypothesis approach to analyse the instability of tourism-led growth. Using panel data on China's 30 provinces over the period 1987–2010, this study examines the direct and indirect effects of tourism on long-term economic growth. Four transmission channels widely held in the resource curse hypothesis are applied in the tourism industry: Dutch disease effect, crowding-out effect, deterioration of institutional quality and volatility of resource trade. The empirical results show that even in the non-tourism-dependent economies there is a possibility that the tourism resource curse will occur in the long term. Tourism resource development tends to reduce economic growth, mainly through crowding out human capital. A tourism boom seems to have a crowding-out effect on industrial production; however, the effect is small and insignificant in the large non-tourism-dependent economies. The physical investment channel is identified as the most important positive transmission channel through which tourism activity exerts more influence on growth.
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