Theses. Paper 21. The Impact of Local Environmental Quality on International Tourism Demand: The Case of China

Abstract: This paper studies the impact of local environmental quality on international tourism demand based on a panel data set of tourist arrivals from ten foreign countries in 18 typical provinces in China over the period of 1999-2010. Ordinary Least Squares (OLS) with different specifications show that the growth of pollution has a negative and significant influence on the international tourism demand. More specifically, the air quality plays a crucial role in this relationship, whereas the water quality does not. In addition, similar results can be found after addressing the potential endogeneity between environmental quality and tourism with the use of the two-stags least squares (2SLS) technique in the study. Our empirical findings suggest that better environmental conservation policies by Chinese government are necessary to promote foreign tourism demand – an important element of economic growth in China