A dynamic international demand model

A formal, theoretical model of the dynamic structure of tourism demand is developed from consideration of information flows. The result is a nonlinear, diffusion form of model specification. Such models are estimated for seven major sources of tourists to Australia, The estimation results show that incomes have a key role in explaining international tourism to Australia. Income elasticities vary across origins according to a life cycle hypothesis in which income elasticities of demand are small for both relatively low and high income earners, and larger for a middle range of incomes. The modeling results also indicate that the usual constant elasticity demand models are likely to be misspecifed. (C) 1998 Elsevier Science Ltd. All rights reserved.