Tourism Productivity and Tourism FDI in Croatia

The purpose of this paper is to examine the effects of foreign direct investment (FDI) in tourism and other relevant control variables on the tourism productivity of Croatia through a model of extended Cobb-Douglas production function. The study included an analysis of quarterly time series data from 2000(1) to 2012(4). Multiple regression analysis showed that a stock of FDI in tourism has a positive significant effect on the tourism productivity. The initial level of productivity and the educational variable also has positive and significant effect on the tourism productivity. Control of Corruption has a negative and significant effect on the productivity of the sector. Rule of Law, an index of capital openness (KAOPEN) and export have a negative, but not significant effect on the tourism productivity. The results of the research indicated that further Croatian tourism development needs FDI. Furthermore, they suggested the importance of improving the institutional environment that has been proven to have a negative impact on the tourism productivity. DOI: 10.5901/mjss.2015.v6n5s2p42