Sumner La Croix, University of Hawaii at Manoa

Christopher Edmonds, University of Hawaii at Manoa

James Mak, University of Hawaii at Manoa

Shawn Arita, University of Hawaii at Manoa

Abstract

Since the early 1990s Chinaís government has granted Approved Destination Status (ADS) to 132 countries. ADS agreements allow government-approved travel agencies in select Mainland Chinese cities to organize group tours to foreign destinations. We use the gravity model of international trade to analyze how ADS grants affected Chinese outbound arrivals at 51 countries (and Hong Kong and Macau) over the 1985-2005 period. Results from pooled OLS and fixed effects regression models for which we assume that ADS is exogenously determined reveal that ADS grants have worked with lags to increase visitor arrivals substantially. To account for endogeneity of ADS grants and lagged adjustment of visitor arrivals to ADS grants and other variables, we also estimate the impact of ADS on arrivals using a system GMM estimator.