Pure Michigan’s award-winning commercials have proven themselves extremely popular with the Michigan public. That the commercials are popular, however, does not make them effective in helping grow the state’s economy. In part because the MEDC has failed to provide transparent, and thus, valuable estimates of the impact of spending on tourism promotion, this study attempts to evaluate this question. A brief description of the methodology is provided below and an appendix to this text contains a full explanation of the model used in this analysis.
Publicly available data from the U.S. Census Bureau, U.S. Department of Labor and the U.S. Travel Association for all of the contiguous 48 states from 1973 to 2012 was used. A statistical analysis of these data estimates the economic impact of both the level and growth of state-funded tourism promotion spending on gross state product and income in three tourism-related sectors: hotels and accommodations, amusements and recreation and arts and entertainment. These sectors were chosen because they are the most likely to be directly impacted in a measurable way by state tourism promotion spending. Importantly, since tourism-related spending is a broad suite of economic activity including such diverse products as fishing bait, museum admissions and airline tickets, it is impossible to measure every possible component. So, in this analysis, choosing those items most likely to be impacted offers a glimpse in to the magnitude of the overall impact.
The following is the equation employed to measure the impact of state promotion efforts:
The Y symbol and related subscripts represent the value of incomes or GSP by (i) state and (t) year. The letter X on the right side of the equation represents inflation-adjusted, state-funded tourism promotion spending. Other terms involve statistical weights that measure the role of state tourism activity and state-funded tourism spending in adjacent regions as well as fixed effects, which capture those aspects of each state that impact tourism activity and that are largely unchanging over time, such as the length of Michigan’s coastline or California’s sunshine.
As a consequence, this model controls for such things as state tourism promotion spending, average tourism promotion spending in nearby states and previous years’ income in each sector analyzed. The analysis also includes a battery of tests for statistical significance and other statistical tests for determining whether or not there might be statistical factors that were unaccounted for in this model (such as large changes to tourism spending in other states).
A detailed explanation of the model and the rationale for its many parts may be found in the section titled in “Appendix: An Estimation Strategy of State Tourism Spending Impacts.”
[*]Some text below was taken from work previously published in December 2015 by the Mackinac Center for Public Policy. Michael LaFaive, “MEDC’s Pure Michigan Puffery” (Mackinac Center for Public Policy, Dec. 3, 2015), https://perma.cc/GW6R-D5YD.