Do greenfield FDI inflows promote international tourism?

Abstract

To what extent do Greenfield foreign direct investment (FDI) inflows to emerging markets and developing economies drive their tourist inflows? Using a novel dataset on bilateral Greenfield FDI, this study is the first to empirically investigate the impact of bilateral Greenfield FDI on bilateral tourist flows. The analysis is based on a large cross-country dyadic dataset comprising 103 origin countries and 63 destination countries over the period 2003–2017. The findings robustly establish that greater flows of bilateral Greenfield FDI stimulate bilateral tourism flows, and this effect is stronger for country pairs that are linguistically further apart and/or with greater physical distance. These findings are not susceptible to potential endogeneity issues.