Tourism and Economic Growth in Ethiopia and Kenya-A Comparative Analysis

Abstract

This article comparatively examines the impact of tourism on the economic growth of Ethiopia and Kenya by using data from 1995 to 2020. The study used descriptive statistics and panel data regression to analyze the data. Accordingly, the result of the descriptive analysis shows that Kenya is consistently surpassing Ethiopia in terms of the amount of revenue that it generates from all tourism types and outlets. However, the average percentage yearly growth rate of Ethiopia exceeds that of Kenya’s in about all of the tourism indicators. The panel data regression analysis depicts that the combined fixed effect model for Ethiopia and Kenya explains 58.29 percent of the variability in the economic growth of the two East African countries. The individual random effect model of each country also demonstrates that tourism explains 99.41 and 99.06 percent of the changeability in the economic growth of Ethiopia and Kenya respectively. The study also found that the countries are different in terms of the impact that business tourism spending, internal travel and tourism consumption expenditure, capital investment on travel and tourism, leisure tourism spending, travel and tourism total contribution to employment, and visitor exports have on their GDP. In contrast, domestic tourism spending, government spending on travel and tourism services, and outbound travel and tourism expenditure have similar impact on the economic growth of the two countries. The paper concludes that, Ethiopia can learn from Kenya strategies to improve number of visitors and tourism receipts; similarly, Kenya could learn how to enhance the growth rate of its slow-moving tourism industry from Ethiopia.