The role of the tourism sector in creating direct employment in Mexico: evidence from linear and nonlinear ARDL frameworks

Abstract

This paper analyzes the role of the tourism sector in creating direct employment in Mexico by measuring the output elasticity of tourism employment from both linear and nonlinear perspectives. Although using such elasticity is a common practice for calculating the impact of economic growth on employment, it has been neglected in the context of the tourism labor market. Using Autoregressive Distributed Lag (ARDL) and Nonlinear Autoregressive Distributed Lag (NARDL) models, this study analyzes the impact of both the quarterly indicator of tourism gross domestic product (GDP) and the multilateral real exchange rate on tourism employment from the first quarter of 2006 to the first quarter of 2021. The results of the linear models show that tourism employment is elastic to variations in tourism GDP. Conversely, the NARDL model illustrates that tourism employment is inelastic to both positive and negative changes in tourism GDP. However, the NARDL model also shows that tourism employment is resilient to the negative phases of growth in the sector, as it grows more during the expansive episodes than it is reduced during the contractive phases. Meanwhile, the models including the multilateral real exchange rate show that tourism employment positively responds to the depreciation of the Mexican peso.