Revisiting Tourism-Led-Growth Hypothesis in the Presence of Structural Breaks: The Case of Spiritual Tourism and Economic Growth in Saudi Arabia

The study explores the Tourism-led-growth Hypothesis (TLGH) with a focus on spiritual tourism and economic growth in Saudi Arabia. Using the Generalised Method of Moments (GMM) for 28 years of annual data, we evaluated the impact of religious tourism on economic growth in the presence of structural breaks. Our analysis yielded promising results; thus, we make 4 important contributions to the literature. First, we establish the presence of a positive relationship between spiritual tourism and economic growth across all our models. Second, we discover that domestic pilgrimage in Saudi Arabia is a modest contributor to economic growth compared with international pilgrimage. Third, we demonstrate the importance of a structural break in modelling the relationship between the two major variables, spiritual tourism and economic growth. Finally, we show that capital formation in Saudi Arabia’s economy is largely from foreign pilgrims. The findings of our study have remarkable significance for both investors and policy makers within and outside Saudi Arabia.