A Long-run Equilibrium Demand Function: Tourism in Mexico

Tourism demand in Mexico is around 80 percent represented by USA visitors. The goal of this paper is to explain the long-term effects of Tourism Demand in Mexico with respect to US visitors. To reach our goal the methodology of this paper follows the Johansen cointegration analysis and using annual time-series data, a single equation is estimated. With the empirical analyze, we study the tourism demand elasticities considering public investment, relative prices of tourist products, and US income per capita. Further analysis shows only one direction of a strongly positive Granger-causality going from number of tourists to the relative prices. We show that US income positively affects the Mexican tourism demand.