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

This study investigates the regional economic consequences of tourism expansion, conceptualizing it as a positive demand shock to the local tradable service sector. While traditional regional development strategies emphasize manufacturing exports, we examine how inbound tourism, a growing form of service trade, can promote regional revitalization. Focusing on the rapid increase in inbound tourists to Japan during the 2010s, we employ a shift-share instrumental variable approach using a novel commuting zone-level dataset to identify causal effects. By disentangling the impacts of international and domestic tourists, we identify the distinct effects of inbound tourism on key regional economic indicators: per capita income, youth demographic shifts, and commercial land prices. These gains are spatially concentrated and moderated by regional heterogeneity, with leisure-oriented and seasonal destinations experiencing more pronounced growth. Our findings suggest that strategic promotion of foreign tourism can effectively mitigate regional decline by optimizing resource utilization and population dynamics.

This is the English version of the Japanese Discussion Paper (25-J-032) with some additional information and changes.