The three sets of tests reported here are designed to evaluate the impact of state-funded tourism promotion spending on the major components of tourism activity in each state: hotel and accommodations, amusement and recreation, and arts and entertainment. The size and changes to tourism-related GSP and incomes are largely related to factors that are invariant across time and spatial effects, such as surrounding state earnings in these sectors. This is unsurprising. Households undertake tourism-related expenditures to visit natural resources and amenities that rarely change. So, popular beach visitation locations such as Florida, Georgia and South Carolina would expect annual tourism GSP and worker incomes to be largely related to the fact that all have beaches and are contiguous, even if some amenities (such as Orlando’s theme parks) have seen significant improvements in recent years.
Insofar as these models were able to capture the bulk of tourism-related economic activity in a given state, this analysis offers a clear result. State-funded tourism promotion has a very small impact on tourism-related economic activity and does not appear to impact salary or wages for workers in these sectors. There is evidence that it boosts GSP in the hotel and accommodations sector and income in the arts and entertainment sector, but the effect sizes are incredibly small and of little practical economic significance.
The result reported above was estimated across all cross sections of states, and so is a national average. However, in separate estimates for one statistically meaningful variable with positive results of tourism spending (hotel and accommodations GSP), only Mississippi, Idaho, Washington, Maryland and Nevada had coefficients that were both statistically significant and different from the GSP estimate reported above. This means that all other states had either the same GSP of state tourism spending or no measurable impact. Notably, only five states had impacts that were larger than the reported coefficient above and statistically meaningful. In these states, the GSP impact of a $1,000,000 state tourism expenditure was as high as $300,000 for hotel and accommodations GSP, but even this is still far below a level of efficacy in this setting.
It is possible that the state-funded tourism promotion boosts revenues and earnings for advertising firms and other economic sectors not estimated here. Since most retail and restaurant purchases are made by locals, estimation of these impacts is not fruitful. Also, statefunded tourism promotion may increase expenditures at public sector tourism sites (state parks, etc.), resulting in higher incomes for public employees. Since data on hotel and accommodations, amusement and recreation, and arts and entertainment are private sector only, this model does not assess that hypothesis.