Research Note: Employment and Wage Sensitivity to Tourism Activities – The Case of US Tourist Arrivals and Expenditure in Hawaii

Abstract

This study explores the dynamic effects of US employment, real wages, employee overtime hours, travel costs and market shocks on tourism demand to Hawaii from the US mainland. The results show that US tourist arrivals and expenditure in Hawaii are sensitive to a change in total employment. These findings suggest that employment growth is a driving force of US tourism demand for Hawaii. In examining the magnitudes of the income and substitution effects of a change in real wages, the income effect is found to outweigh its substitution effect, indicating that a rise in income resulting from a higher wage increases tourist expenditure in the USA. In addition, the 2001 terrorist attacks and the 2008 financial crisis have had detrimental impacts on tourism demand for Hawaii destinations.

Keywords

employment and wage impacts Hawaii tourism demand income and substitution effects

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