https://doi.org/10.1177/1938965517735743 Cornell Hospitality Quarterly 1–8 © The Author(s) 2017 Reprints and permissions: sagepub.com/journalsPermissions.nav DOI: 10.1177/1938965517735743 journals.sagepub.com/home/cqx Article Introduction Retrospectively, tourism has been viewed as a nonproduc- tive sector that is less likely to contribute to economic growth because it involves nothing more than funs and leisure (Vanhove, 2011). However, this view has changed and nowadays tourism has become the world’s largest and rapidly growing services sector even during the economic crisis periods. Instead of exporting goods, exports of ser- vices in the form of tourism may be an alternative option for generating economic growth. Tourism brings multiple benefits and influences the economic development of the host countries through a variety of mechanisms. There is a lengthy literature on how tourism could encourage new investments in tourism-related eco-system, increase gov- ernment tax revenue, generate employment opportunities, and reduce current account deficits (e.g., Sharpley & Telfer, 2002; Sinclair & Stabler, 1997). Moreover, there is also literature that argues that tourism development could help alleviate poverty and reduce economic inequality between developed and less developed countries (e.g., Jamieson, Goodwin, & Edmunds, 2004; Muganda, Sahli, & Smith, 2010; Raza & Shah, 2017; Suntikul, Bauer, & Song, 2009). Owing to all these positive effects, many countries are moving toward promoting their tourism sec- tors with the aim of simulating economic growth. The positive role of tourism in economic growth is referred in the literature to as the tourism-led growth (TLG) hypoth- esis, most notably after the seminal work of Balaguer and Cantavella-Jordá (2002). Since 2002, a large number of empirical studies on the TLG hypothesis have emerged in the literature using a wide range of methods and datasets and covering both single and multiple countries (or regions). 1 However, the empirical evidence on the validity of this hypothesis is mixed. For the sake of brevity, our review of the past literature reveals that there are two strands of the literature where one strand is in favor of the TLG hypothesis (e.g., Adamou & Clerides, 2010; Brau, Lanza, & Pigliaru, 2007; Brau, Liberto, & Pigliaru, 2011; Chiu & Yeh, 2017; Tang, Cheam, & Ong, 2017) while another strand dismisses it (e.g., Arslanturk, Balcilar, & Ozdemir, 2011; Katircioglu, 2009; Oh, 2005; Payne & Mervar, 2010). With such conflicting empirical results, it is difficult to confidently conclude and derive any reasonable policy recommendations for boosting tourism as a means of achieving high economic growth. Hence, the empirical validity of the TLG still remains a subject that deserves great attention. In addition, a more in-depth explo- ration of this topic is essential. The major limitations of the past studies are their tendency to neglect the root causes of their conflicting results and their failure to account for country-specific factors. According to Tang and Abosedra (2016), variations in the empirical results 735743CQX XX X 10.1177/1938965517735743Cornell Hospitality QuarterlyTang and Tan research-article 2017 1 Universiti Sains Malaysia, Penang, Malaysia 2 University of Malaya, Kuala Lumpur, Malaysia Corresponding Author: Chor Foon Tang, Centre for Policy Research and International Studies, Universiti Sains Malaysia, 11800 USM, Penang, Malaysia. Email: tcfoon@usm.my Tourism-Led Growth Hypothesis: A New Global Evidence Chor Foon Tang 1 and Eu Chye Tan 2 Abstract The primary aim of this study is to determine whether the tourism-led growth hypothesis is globally valid by accounting for countries’ income levels and their institutional qualities, against a panel dataset of 167 countries. The institutional qualities referred to are political stability and corruption control. We employ the dynamic panel generalized method of moments (GMM) approach to examine the relationship. It can be inferred from the exercise that tourism positively contributes to economic growth but the effect varies across countries at different levels of income and institutional qualities. Therefore, the effect of tourism on economic growth is contingent on levels of income and institutional qualities of the host tourism countries. Policy initiatives that aim to promote and strengthen institutional qualities should be undertaken for a country to enjoy the beneficial impact of tourism on economic growth and development. Keywords corruption; economic growth; political stability; tourism-led growth