Demand for tourism in Greece: A panel data analysis using the gravity model

Tourism is one of the major drivers of the Greek economy. The contribution of tourism to the Greek economy has proved especially relevant during the period of the credit and Euro crises with a high budgetary and balance of payment deficits. From that perspective, this study examines the impact of the socio-economic and geographical determinants of foreign tourism demand in Greece. For the empirical analysis, a panel dataset of 31 countries is used over the period 2001-2010. The panel data estimation indicates that distance and trade have more explanatory power than relative prices and other determinants such as transport infrastructure. Income is statistically significant in three out of the eight specifications. Also, political stability seems to play an important role in tourism demand. The results are mixed for the competitive prices between Greece and its main tourism competitors. An interesting finding is that the Olympic Games of 2004 seem to have had a negative impact on international tourist arrivals in Greece in that year