Measuring the effect of subsidization on tourism demand and destination competitiveness through the AIDS model: an evidence-based approach to tourism policymaking

Abstract

There is increasing recognition of the need for improved policymaking in tourism and the consequent evaluation of tourism public policies. This paper demonstrates the usefulness of econometric modelling for tourism policy analysis, showing that crucial information is generated from such econometric policy analysis. A dynamic Almost Ideal Demand System (AIDS) model is used to quantify the impact on demand elasticity of Malta's policy of supporting British inclusive tour holidays. Such analysis can contribute to improved policymaking as the policymaker is informed about how and to what extent the market has responded to previous policies – thus promoting an evidence-based approach to tourism policymaking.