The Impact of Inbound Tourism on Regional Economic Development: Evidence from Japanese commuting zone-level data

In a rapid aging society such as Japan, the promotion of inbound tourism is expected to be a catalyst for revitalizing local economies. This study reexamines the so-called tourism-led growth hypothesis by investigating whether tourism promotes regional development using data at the commuting zone level in Japan. We construct the commuting zone-level data for the number of domestic and international overnight visitors by aggregating the individual data of hotels and accommodations obtained from Overnight Travel Statistics Survey (Japan Tourism Agency). To assess the causal impact, a shift-share instrumental variable was used to address the simultaneity of regional economic indicators and the number of overnight visitors. Our results indicate that the increase in inbound tourists has a positive effect on some economic indicators, such as an increase in taxable income per capita, an increase in the population of young people, and an increase in commercial land prices in regions with small population sizes that are highly dependent on tourism and in large cities with international airports.