Abstract
Linear and non-linear long-run association between tourism and economic growth is examined using the autoregressive distributed lag procedure with Sri Lanka as a reference country over the sample period 1978– 2014. Linear estimation results indicate that a 1% increase in tourism receipts result in an increase in the output per worker by 0.10% in the long run. The net effect in the short run is marginally negative and generally mixed.
Non-linear relationship explains the effectiveness of the tourismindustry depends strongly on public infrastructurewhich is subject to congestion like the public transport, airports, road systemor telecommunications. A longrun U-shape relationship is detectedwith the minimumnecessary tourismreceipts of 1.26% ofGDP. The causality results indicate that higher tourism receipts causes growth. The method applied here can be used to examine other countries in the similar domain.