Impacts of exported Turkish soap operas and visa

Tourism Management 37 (2013) 186e192

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Tourism Management journal homepage: www.elsevier.com/locate/tourman

Impacts of exported Turkish soap operas and visa-free entry on inbound tourism to Turkey Faruk Balli a, b, *, Hatice Ozer Balli b, c, Kemal Cebeci d a

Department of Business Administration, Suleyman Sah University, Turkey School of Economics and Finance, Massey University, Private Bag 11-222, Palmerston North, New Zealand c Department of Economics, Suleyman Sah University, Turkey d Department of Public Finance, Marmara University, Istanbul, Turkey b

h i g h l i g h t s < The Turkish soap operas exported to many countries has boosted tourist inflows from those countries to Turkey. < The Turkish government’s visa-waiving policies helped ordinary international tourists to visit to Turkey easier. < The general factors also are significant in explaining international tourism demand of Turkey.

a r t i c l e i n f o

a b s t r a c t

Article history: Received 29 March 2012 Accepted 26 January 2013

We examine the main determinants of the recent boost in the number of tourist inflows to Turkey, focussing on the indirect marketing effect of the Turkish soap operas exported abroad and recent changes in the Turkish government’s foreign policies. Applying a traditional tourist demand gravity model, we explore that the recent increase in the popularity of the Turkish soap operas in the Middle East and Eastern Europe has boosted the number of inbound tourists to Turkey from those countries, and as the number of hours of Turkish soap operas aired in a particular country increases, the tourist flows from that country to Turkey increase as well. We also consider the Turkish government’s recent bilateral agreements with other countries to waive the visa requirements for ordinary foreign visitors, and indicate that the termination of visa requirements has increased the tourist flows from those countries to Turkey. Ó 2013 Elsevier Ltd. All rights reserved.

JEL classification: F41 L83 Keywords: Dynamic panel Film tourism Gravity model Turkish soap operas Tourist inflows

1. Introduction The visual media, i.e. TV shows and films, are the most important vehicles for attracting people’s attention. Most of the world’s population have used visual media to entertain themselves and spend their leisure time. A wide number of studies focus on the importance of the visual media on marketing purposes. Some of those studies focused on the role of the greater extent of visual media for influencing international tourism demand (Butler, 1990; Croy, 2010; Edensor, 2001; Kim, 2012; Kim & Richardson, 2003; Laing & Crouch, 2009;

* Corresponding author. School of Economics and Finance, Massey University, Private Bag 11-222, Palmerston North 4412, New Zealand. Tel.: þ64 6 356 9099x2330; fax: þ64 6 350 5651. E-mail addresses: [email protected] (F. Balli), [email protected] (H.O. Balli), [email protected] (K. Cebeci). 0261-5177/$ e see front matter Ó 2013 Elsevier Ltd. All rights reserved. http://dx.doi.org/10.1016/j.tourman.2013.01.013

Portegies, 2010; Urry, 1994). Among the visual media, TV shows and films have undeniable power for influencing audiences. Riley, Baker, and Van Doren (1998), Beeton (2005), Macionis and Sparks (2009), and Mordue (2009) have extensively studied, the media e TV shows and movies e on tourists’ motivation for selecting destinations; the literature has called this “film/movie induced tourism”. Connell (2012) has provided a great summary on the impact of the movie industry on tourism. On August 30, 2008, eighty-five million Arab viewers were stuck to their TV sets for the finale of the Arabian-dubbed Turkish soap opera named “Noor.”1 Later, in 2009, following Noor’s unbeatable success, another Turkish soap opera succeeded in attracting TV

1 Noor is a Turkish melodrama originally broadcasted in Turkey as Gumus. The series became a pop-culture phenomenon when it was aired across the Arab world as Noor by the Middle Eastern Broadcast Company (MBC).

F. Balli et al. / Tourism Management 37 (2013) 186e192

watchers across the Middle East. Sixty-eight million Arabian TV viewers were sitting on their couch to watch the finale of Sanawat al Dayaa (Buccianti, 2010).2 The Arabian watchers’ loyalty to the Turkish soap operas is not confined to just sitting down and watching the soap operas: the sales of t-shirts and posters of Noor even surpassed those featuring Arab leaders like Saddam Hussein or Yasser Arafat (Khaleej Times, 2008). Giving another example of Turkish soap operas’ successes abroad, in 2010, Slovakia’s leading private broadcaster operated by Central European Media Enterprises (CEME) started airing, A Thousand and One Nights, which has been breaking viewer rating records. The Slovakians are so obsessed with the characters of A Thousand and One Nights that a Slovakian rock band named Kissuck featured a pair of models of the main characters of this series on their music clips to attract people’s attention. These examples truly show the success of the Turkish soap operas in foreign markets, and this success is observed in record-breaking TV ratings as well as in how they influence foreign audiences’ preferences. The Turkish soap opera industry, due to the competition among domestic TV channels in Turkey, has developed substantially in recent years. Turkish entrepreneurs have looked for the possibility of exporting Turkish soap operas since 2001. A big jump in soap opera exports has occurred since 2005. Now, Turkish soap operas are considered a growing export item under Turkish export industry. According to the Turkish Statistical Institute, the value of Turkish soap operas exported has reached to 100 million USD (United States dollars) in 2011, even though this is a small amount relative to the total value of Turkey’s export, which is around 135 billion USD in 2011. This paper, however, does not study the impact of Turkish soap operas on Turkish exports; rather, it emphasizes the role of the exported soap operas in affecting Turkey’s international tourism demand. According to the latest World Tourism Organization (WTO) statistics, Turkish inbound tourism growth has outstripped the European Union and global averages, and the inflows have more than doubled since 2002. In this paper, we aim firstly to relate the boost in the number of tourist inflows to the Turkish soap operas exported abroad. A number of studies have investigated how the visual media influences audiences in terms of tourism marketing purposes, both theoretically and empirically (Beeton, 2005, 2010; Kim, 2012; Kim, Argusa, Lee, & Chon, 2007; Kim, Long, & Robinson, 2009). However, all these studies have investigated the effect of certain TV shows on single market destinations. For instance, Kim et al. (2007) explored the effects of the Korean TV drama series named Winter Sonata on potential and actual Japanese tourist flows to South Korea. In this study, they conducted a survey on Japanese tourists and explored the effect of the Korean drama series broadcasted via Japanese TV channels on their choice of holiday destinations. In a different study, Kim et al. (2009) related tourist inflows into Korea to the increase in Korean TV shows and soap operas, focussing on multiple markets where Korean soap operas were exported. This study is limited in that it provides only comparative statistics between the exported TV shows and tourist inflows, rather than building a model to measure the impact of soap operas on inbound tourists. Our paper has also been motivated by the recent changes in the Turkish government’s foreign policies. Since 2006, the Turkish government has eliminated visa requirements for ordinary foreign visitors from many countries from Central and Northern Africa, Central and East Asia, the Middle East and Latin America. Even though visa-free entry is an important tool to increase international

2 Sanawat al Dayaa (The Lost Years) is another Turkish soap opera originally broadcasted in Turkey as Ihlamurlar Altinda. It was aired to Arab TV watchers by MBC.

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tourism demand, there has been limited academic research into the effects of these arrangements. Choong-Ki, Hak-Jun, and Lawrence (2010) have studied the effect of visa elimination in a paper investigating the number of Korean tourists visiting Japan. They showed that visa elimination favours the number of international tourist flows. Considering that the recent changes in Turkey’s visa policies have been effective for multiple countries, in this paper, we also investigate the effect of visa-free entry on the tourist inflows to Turkey. We employ a gravity model to explore the determinants of the tourist inflows from 81 different countries between 1995 and 2010. International tourism is considered a form of international trade. Thus modelling bilateral tourist flows would be similar to creating a gravity model, as in bilateral trade models. Apart from conventional determinants of the gravity model, we employ the bilateral trade volumes between the source countries and Turkey to capture the comparative advantage of transportation costs between countries. Bilateral trade volume is widely used to measure the “extent” of economic integration between countries; this variable also captures the ease of transportation costs between two centres, thereby measuring if there is a comparative advantage between these two destinations. More importantly, we test for the effect of the Turkish soap operas exported to multiple markets on the tourist inflows to Turkey. Using the number of hours of soap operas exported to different countries taken from Calinos Incorporation and the web-sites of national broadcasting companies in the Middle East, Slovakia, Hungary and Russia for the years between 2001 and 2010, we are able to discuss the isolated effect of soap operas on inbound tourists. Again, new to the literature, we control for the recent government policy changes in international relations, i.e. the Turkish government’s bilateral agreements, mostly with the countries in the Middle East, Central and Eastern Europe, East Asia, Central and North Africa, and Latin America to waive the visa requirements for ordinary foreign citizens. The remainder of this paper is organized as follows: Section 2 discusses the data and descriptive statistics for the variables used in the paper. Section 3 presents the conventional gravity model and its empirical results. Section 4 outlines the results for the dynamic panel model. Section 5 concludes the paper. 2. Data and descriptive statistics The data have been collected from different number of sources. In obtaining our dataset, we employ 81 source countries for a period between 1995 and 2010. The tourist volumes between Turkey and the source countries have been gathered from the Ministry of Culture and Tourism of the Republic of Turkey (MCTRT). The bilateral trade volume data have been obtained from the International Monetary Fund’s (IMF) Direction of Trade Statistics Database (DOTS). Population and Gross Domestic Product (GDP) per capita (in USD) have been obtained from IMF’s International Financial Statistics (IFS) database. The relative Consumer Price Index (CPI) variable, i.e. the CPI of Turkey adjusted to USD has also been collected from the IFS database. The accommodation variable created by collecting the number of hotel rooms in Turkey has been obtained from MCTRT. The binary variables ehaving a colonial relationship (COLONY), sharing the same border (BORDER), sharing the same language (COMMON LANGAUAGE), practising the same religion (RELIGION) and physical distance between the source country and Turkey (DISTANCE) e have been obtained from Centre d’Etudes Prospectives et d’Informations Internationales (CEPII), an independent French institute for research into international economics. The Turkish government has initiated bilateral visa agreements to waive the visa requirements for ordinary visitors. To quantify this policy change, we create a binary time series variable, which takes 1 if the ordinary citizens of the source country (i) have

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no visa requirements for entering Turkey starting at time t and 0 otherwise. We obtain this information from the Resmi Gazete, the official gazette of the Republic of Turkey. Turkish soap operas have been exported by Turkish entrepreneurs since 2001. First, soap operas were sold to Central Asian countries, including Kazakhstan and Uzbekistan, where countries share a common ethnic background with Turkey. Later, export of the Turkish soap operas has been expanded to a wide range of countries including all Middle Eastern and North African countries, Central Asian and a number of Eastern European countries: Bulgaria, Greece, Romania, Slovenia, Slovakia, Hungary, Ukraine, Moldova, Serbia, Macedonia, and Russia. To capture the effect of the Turkish soap operas on inbound tourists, we created a variable, SOAP OPERA, assigning the number of hours of Turkish soap operas exported to country (i). These data have been gathered from many sources. We obtained most of these data from the Calinos Group of companies, which exports nearly 80% of the Turkish soap operas on its own. We obtained the rest of the data from different TV channels, including from MBC, a Saudi Arabia-based TV broadcasting company, and other TV channels in Slovakia, Russia, Lebanon and Hungary. Examining the dataset, one might raise the issue of the overlap of the countries that have eliminated visa requirements with Turkey and import Turkish soap operas. However, the issue is not clear-cut. For example, for some countries, for one or two years of observations (say 2007 and 2008), there was both a visa-waiving policy and soap operas were exported to that country, but for the other years, overlapping does not exist. We are able to say that there are 22 countries with a visa termination policy with Turkey and that imported soap operas (occurring at least for one year of observation). The number of the countries with a visa termination policy but that did not import Turkish soap operas is 34 (at least one year’s observation), the number of the countries without visa termination but which imported soap operas is 14 (at least one year’s observation) and countries without visa termination and which did not import soap operas is 33 (at least one observation).3 Table 1 contains descriptive statistics for the variables used in this paper. We provide the mean, the standard deviation (SD), the number of observations, minima and maxima for each variables to check whether the variables used in the tables have been collected appropriately. We obtain the pair-wise correlations of the variables between a range of 0.45 and 0.52 in our sample. For the sake of brevity, we did not provide the pair-wise correlation table. Additionally, we show the annual percentage change in tourist inflows to Turkey in Fig. 1. It contains two series: one is the annual percentage change in tourist inflows from the world; the other indicates the annual percentage change in tourist flows from the countries Turkish soap operas have been exported to. We intend to compare the growth of tourist inflows from the countries that imported Turkish soap operas with the overall growth of tourist flows in Turkey. Particularly after 2005, the white bars are higher than the black bars, indicating that the annual percentage change of tourist inflows from the countries that imported Turkish soap operas are higher than the total annual percentage change of tourist inflows to Turkey. In the paper, we claim that exported soap operas might be one of the reasons for this difference.

3 Adding up all subsets gives a result higher than 81 (total number of the countries) since the export data and visa termination for some countries take both 0 and 1, and counted in different groups. Say, for the state of Qatar, the bilateral visa termination was signed in 2010, the binary variable takes 0 before 2010 and takes 1 after 2010, and thus Qatar is double counted.

Table 1 Descriptive statistics.

ACCOMMODATIONj BORDERij COLONYij COMMON LANGUAGEij CPIj DISTANCEij GDPi POPULATIONi RELIGIONij SOAP OPERAij TOURISTij TRADEij VISAij

Mean

SD

Min

Max

Obs

242,751 0.06 0.04 0.07 0.49 4027 14,494 63,652 0.21 39.33 200,189 1615 0.51

21,019 0.28 0.31 0.26 2.12 3774 17,328 185,804 0.46 6.03 487,358 3430 0.48

202,483 0 0 0 12.12 502 321 267.47 0 0 108 12 0

278,255 1 1 1 10.12 17,234 118,672 1,318,194 1 213.11 4,488,350 4,488,350 1

1296 1296 1296 1296 1264 1264 1296 1296 1296 1296 1220 1257 1296

Notes: the dependent variable, TOURISTij, is the number of tourist flows from source country (i) to Turkey (j). COMMON LANGUAGEij is a binary variable that takes 1, if more than 80% of the population of both the source and destination countries speak same language and 0 otherwise. Similarly, RELIGIONij is another binary variable that takes 1 if more than 80% of the population of both the source and destination countries practise same religion and 0 otherwise. ACCOMMODATIONj is the accommodation (total number of the rooms in hotels) available in Turkey. BORDERij is another binary variable that takes 1, if source country (i) and Turkey (j) share same border and 0 otherwise. DISTANCEij is the physical distance between the capital cities of source country (i) and Turkey (j) (in kilometres). GDPi is the real GDP per capita in source country (i), in USD. CPIj is the CPI of the destination country adjusted by the exchange rate in USD. POPULATIONi is the total population of source country (i) in thousands. TRADEij is the total trade value (exports þ imports) between source country (i) and Turkey (j) in million USD. VISAij is again another binary variable that takes 1 if there are no visa requirements for the ordinary citizens of country (i), entering Turkey, and 0 otherwise. SOAP OPERAij shows the number of hours of Turkish soap operas exported to country (i).

3. The static panel model Tourism is widely considered to be a form of international trade. Thus, modelling bilateral tourist flows would be similar to creating a gravity model for bilateral trade (Poyhonen, 1963; Tinbergen, 1962) or bilateral financial asset flows (Lane & Milesi-Ferretti, 2008). In the basic forms of the gravity model, the amount of flows (trade) between the source and destination countries is assumed to increase with their size (population, GDP per capita and market capitalization are the variables used in the economic sense) and to decrease with the distance between the economic centres (distance and cost of transportation). Adding to the gravity model, some studies (Balli, Louis, & Osman, 2009; Balli, Basher, & Balli, 2010; Eilat & Einav, 2004; Lane & Milesi-Ferretti, 2008; Okowa & van Wincoop, 2012; Witt & Witt, 1995) have been successful in including some similarity variables, such as a sharing the same border dummy, a having a colonial relationship dummy, a common language dummy and common currency or common religion dummies. Following the earlier literature, we use the following equation to model inbound tourist numbers:

TOURISTij;t ¼ b0 þ b1 GDPi;t þ b2 TRADEij;t þ b3 POPULATIONi;t þ b4 ACCOMMODATIONj;t þ b5 CPIj;t þ b6 VISAij;t þ b7 SOAP OPERAij;t1 þ Xij;t b þ 3ij;t : (1) The dependent variable, TOURISTij,t, is the natural logarithm of the tourist inflows from country (i) to Turkey (j) at time t. TRADEij,t is the trade value (exports þ imports) between Turkey (j) and country (i) in USD. GDPi,t and POPULATIONi,t are the real GDP per capita and population levels of source country (i) in logarithmic terms, respectively. ACCOMMODATIONj,t is the accommodation (total number of the rooms in hotels in logarithms) available in Turkey at time t, CPIj,t is the relative CPI of Turkey (j) adjusted to USD. VISAij,t is a binary variable that takes 1 if ordinary passport


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TOTAL 40% SOAP IMPORTING COUNTRIES

30%

20%

10%

0% 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 -10%

-20%

-30% Fig. 1. The annual percentage change in the number of tourist inflows to Turkey. Source: Ministry of Culture and Tourism of Republic of Turkey and authors’ own calculations. Total refers to the annual percentage change in tourist flows from all countries in our analysis, whereas soap importing countries refer to the annual percentage change in tourist flows from countries which imported Turkish soap operas.

holders from country (i) are able to enter to Turkey without any visa requirements and takes 0 otherwise. SOAP OPERAij,t1 is simply the total number of the hours of Turkish soap operas exported to country (i), at time t 1. We consider that Turkish soap operas would not influence foreign audiences’ preferences instantaneously but we allowed a one-year period for foreign visitors from country (i) to adjust their preferences in deciding on foreign destinations to visit. Xij,t contains the bilateral variables that are widely used to model bilateral trade, investment and immigration volumes such as the sharing the same border dummy, the sharing the same language dummy and the practising the same religion dummy. We present the variables that are statistically significant in models. Apart from the variables described above, we also control for different events including the so-called “1-min” event with a binary variable created for 2009 and afterwards. When the Turkish prime minister had an argument with the President of Israel in Davos, Switzerland, this increased the popularity of Turkey in the Middle East after 2009. We also employed another dummy for year 2007 and afterwards: a dummy for the year of second selection of the governing party in Turkey, mostly considered the beginning of the Turkish government facing towards the East instead of the West. After finding that all variables are stationary via the panel unit root test of Im, Pesaran, and Yongcheol (2003), we record the regression results for Equation (1) in Table 2. We performed four different regressions to test the baseline variables and to capture the effects of the visa-waiving agreements and exported Turkish soap operas, separately and jointly. We used JarqueeBera statistics for testing the normality of the residuals and we fail to reject the normality of residuals, which is reported in Table 2.4 In addition, we test for autocorrelation and heteroskedasticity in the models and find evidence

4 The null hypothesis for the JarqueeBera test is that the residuals are normally distributed.

for both of them in our models; therefore, we present the heteroskedasticity and autocorrelation corrected standard errors in the table. For all regressions, to overcome the possible endogenity problem of a bilateral trade variable (consistent with previous studies), we use the colonial relationship dummy as an instrumental variable. The first column contains the regression analysis for the baseline variables. Consistent with Witt and Witt (1995) and Lim (1997), sharing the same border and the same language have highly significant and positive coefficients, although our estimate is on the lower side compared to that of Witt and Witt (1995) and Lim (1997) for explaining the number of inbound tourists to Turkey. The results Table 2 Static panel data estimation. (1)

(2)

(3)

(4)

COMMON LANGUAGEij,t DISTANCEij,t BORDERij,t RELIGIONij,t GDPi,t TRADEij,t POPULATIONi,t ACCOMMODATIONj,t CPIj,t VISAij,t SOAP OPERAij,t1

1.82z (0.46) 0.94z (0.19) 1.44z (0.36) 0.94z (0.19) 0.31z (0.07) 1.20z (0.26) 0.21y (0.09) 0.47z (0.12) 0.31z (0.06) e e

1.59z (0.31) 0.88z (0.20) 1.17z (0.37) 0.78z (0.24) 0.24y (0.12) 1.16z (0.29) 0.23z (0.06) 0.46z (0.10) 0.20y (0.08) 0.64y (0.17) e

2.19z (0.21) 0.87z (0.20) 1.43z (0.40) 0.91z (0.19) 0.32z (0.14) 3.92z (0.35) 0.24z (0.06) 0.48z (0.13) 0.31z (0.10) e 0.06z (0.02)

1.65z (0.22) 0.89z (0.12) 1.17z (0.21) 0.76z (0.10) 0.21z (0.10) 1.17z (0.11) 0.22z (0.05) 0.65z (0.11) 0.22z (0.11) 0.64y (0.07) 0.09z (0.02)

SAMPLE JarqueeBera p-value ADJUSTED R-SQUARE

1132 0.41

1132 0.44

1132 0.45

1132 0.40

0.69

0.71

0.75

0.78

Notes: *, y and z indicate that the relevant coefficient is significant at the 10%, 5% and 1% level, respectively. See Table 1 for the variable definitions. Heteroskedasticity and autocorrelation-corrected standard errors are reported in parentheses. Dependent variable: the logarithm of the number of tourist flows from source countries to Turkey.

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suggest that a common language or geographical proximity may facilitate an easier trip to Turkey. Apart from those variables, following Balli, Jean Louis, and Osman (2011), the practising the same religion variable also has a positive and significant effect (0.94 with an SD of 0.19), confirming that cultural similarities (based on religion) play a significant role in attracting more tourists to Turkey, particularly from Islamic countries. Istanbul, formerly the capital of the Islam-dominated Ottoman Turks, contains the oldest and some of the most fascinating mosques, and other respectable Islamic symbols and places. This has attracted many tourists from the Islamic countries to visit those places, which would be the reason why the religion dummy is highly significant. GDP and POPULATION variables also have solid and intuitive coefficients (0.31 and 0.21, SDs of 0.07 and 0.09, respectively) which suggest that the richer the source country is, more tourists you expect to have from that country; the same applies for the population variable (Chadee & Mieczkowski, 1987; Naudee & Saayman, 2005; Witt & Witt, 1995). As far as relative prices in the destination are concerned, it is common in previous studies (Eilat & Einav, 2004; Naudee & Saayman, 2005) to use the CPI of a destination country adjusted by the USD as a proxy for relative tourism prices. This measure of relative prices captures changes in the real exchange rate over time as well as cross-sectional variations in the cost of travel. The coefficient of relative CPI (0.31 with an SD of 0.06) shows that differences in the cost of living matter to an extent and that tourists are sensitive to the price level in Turkey. Following Lane and Milesi-Ferretti (2008), who explored the relationships between bilateral investment flows and trade volumes between source and destination countries, we employ bilateral trade volume as a solid determinant of the inbound tourist numbers, given that higher trade volumes between two countries would create a comparative advantage in transaction costs. Apart from Smith and Toms (1967) and Eilat and Einav (2004), the tourism literature has not explored the direct relationship between trade volume and tourist inflows extensively. We show that the coefficient of bilateral trade volume (1.20 with an SD of 0.26) is highly significant and positive for all regressions, meaning that international tourists are more inclined to visit Turkey, as their nation has more economic ties with Turkey. Our estimate for the bilateral trade variable is more powerful compared to that of Eilat and Einav (2004), where they find mixed results on the effect of bilateral trade on tourist flows. Given that all baseline variables of column (1) have meaningful and significant coefficients for explaining the determinants of tourist flows to Turkey, in the second column, we test if the Turkish government’s recent visa-waiving agreements have boosted tourist inflows to Turkey. The coefficient of the visa dummy is significant and positive (0.64 with an SD of 0.17), suggesting an increase in the tourist flows from the countries where visa requirements have recently been waived for regular citizens. The third column tests for the possible effect of exported Turkish soap operas. We estimated a significant and positive coefficient (0.06 with an SD of 0.02), meaning that exports of Turkish soap operas (in number of hours) have a positive marketing effect for Turkish tourism.5 The adjusted R2 also increases from 0.69 to 0.75 when we add the soap opera variable to the list of explanatory variables for tourists inflows to Turkey. The last column shows the results for testing for the joint effect of the visa-waving policy and the exported soap operas. It shows that both the coefficients of exported Turkish soap operas and visa-waving policy dummy are jointly

5 Thanks to the anonymous referee, we control for the ethnic relationship of Turkey with its neighbouring countries. For example, some Turkish citizens have relatives living on the neighbour countries. This might affect the estimations. Accordingly, we control for the border effect (Syria, Iraq and, to some extent, Bulgaria and Greece), by dropping these countries and rerunning the regressions. However, the results have not changed substantially.

significant and effective in explaining the inbound tourist numbers to Turkey. The result of the F-test for soap opera and visa-waving policy variables strongly rejects the null hypothesis of these variables jointly being insignificant. 4. Dynamic panel data model There are two important issues in the panel data model. First, time-invariant country characteristics (fixed effects), such as geography and demographics, may be correlated with the explanatory variables. The fixed effects contained in the error term of Equation (1) consist of the unobserved country-specific effects. Second, in the previous section, we omitted persistency issues in international tourism demand. For instance, if you are a tourist, you may consider visiting the same country next year, since you like the place a lot and/or you do not want to run the risk of ruining your holiday by visiting an unknown place. This is called the “persistence and reputation effect” (Naudee & Saayman, 2005). Incorporating these dynamics into the previous model, the new model would be as follows:

TOURISTij;t ¼ b0 þ b1 TOURISTij;t1 þ b2 GDPi;t þ b3 TRADEij;t þ b4 POPULATIONi;t þ b5 ACCOMMODATIONj;t þ b6 CPIj;t þ b7 VISAij;t þ b8 SOAP OPERAij;t1 þ Xij;t b þ 3ij;t : (2) Due to the inclusion of the TOURISTij,t1 variable, a problem of endogeneity arises and regular Ordinary Least Square (OLS) estimations provide biased results (Khadarooa & Seetanah, 2008; Naudee & Saayman, 2005). To overcome this problem, instrumental variables (IVs) need to be used to overcome the endogeneity problem in dynamic models. The possibility of having strong instruments for the TOURISTij,t1 variable is low. In the case of having weak instruments for the TOURISTij,t1 variable, IV estimators are likely to be biased towards the OLS. Accordingly, to cope with this problem, the difference Generalized Method of Moments (GMM) of Arellano and Bond (1991) estimator is widely used in the literature. The lagged levels of the endogenous variable are included as instruments. This makes the endogenous variables pre-determined and, therefore, they are not correlated with the error term. In order to remedy the problem mentioned above, we use first-differences (first step) to transform equation (2) into:

DTOURISTij;t ¼ b0 þ b1 DTOURISTij;t1 þ b2 DGDPi;t þ b3 DTRADEij;t þ b4 DPOPULATIONi;t þ b5 DACCOMMODATIONj;t þ b6 DCPIj;t þ b7 DVISAij;t þ b8 DSOAP OPERAij;t1 þ D3ij;t : (3) The left-hand side is the log difference in tourism flows from the source country (i) to Turkey (j) at period t. Table 3 reports the first-step GMM estimator of Equation (3). We used JarqueeBera statistics for testing for the normality of the residuals and we fail to reject the normality of the residuals. In addition, we test for the autocorrelation and heteroskedasticity of the models and find evidence for heteroskedasticity. We have presented the heteroskedasticity-corrected standard errors. In all three regressions, the first- and second-order correlation ArellanoeBond (AB) tests have p-values greater than 10%, which means that there is not enough evidence to support that there is autocorrelation. This finding validates the use of suitably lagged endogenous variables as instruments. Additionally, the p-values of


References

Table 3 Dynamic panel data estimation. (1)

(2) z

191

(3) z

(4) z

z

DTOURISTij,t1 DGDPi,t DTRADEij,t DPOPULATIONi,t DACCOMMODATIONj,t DCPIj,t DVISAij,t DSOAP OPERAij,t1

0.47 (0.03) 0.62z (0.04) 0.11z (0.02) 0.99z (0.08) 0.04 (0.03) 0.46z (0.04) e e

0.46 (0.03) 0.57z (0.04) 0.08z (0.01) 1.12z (0.10) 0.06 (0.14) 0.31z (0.05) 0.31z (0.04) e

0.47 (0.03) 0.60z (0.04) 0.41z (0.05) 0.68y (0.10) 0.12y (0.06) 0.42y (0.14) e 0.12z (0.02)

0.46 (0.04) 0.57z (0.04) 0.13z (0.04) 1.07y (0.10) 0.12y (0.06) 0.32z (0.04) 0.31z (0.06) 0.14z (0.04)

SAMPLE JarqueeBera p-value AB(1) test p-value AB(2) test p-value Sargan statistic p-value

1010 0.34 0.21 0.26 0.81

1010 0.38 0.26 0.23 0.85

1010 0.44 0.20 0.31 0.89

1010 0.36 0.41 0.35 0.88

Notes: *, y and z indicate that the relevant coefficient is significant at the 10%, 5% and 1% levels, respectively. See Table 1 for the variable definitions. Heteroskedasticitycorrected standard errors are reported in parentheses. Dependent variable: the log difference of the number of tourist flows from source countries to Turkey.

the Sargan test of over-identifying restrictions fails to reject the null hypothesis that the instruments are exogenous in any specification. The main findings are not different from the first model in general. On the top of the previous results, the lagged coefficient of TOURIST is highly significant and around 47% for all models, which validates the persistence and reputation effects. The coefficients of POPULATION and GDP are again significant (0.99 and 0.62, with SDs of 0.08 and 0.04, respectively), as expected: the greater (higher) the population (GDP per capita) of the origin country, the greater the number of tourists flows to Turkey. CPI is negative and significant (0.46 with an SD of 0.04), confirming Table 2 about the cost motivation of the tourists. TRADE is highly significant as well, confirming the importance of the economic ties between the origin country and Turkey on inbound tourists to Turkey. In the dynamic model, time-invariant variables, i.e. practising the same religion, sharing the same border, distance, sharing the same language have been deleted automatically. Focussing on the control variables, SOAP OPERA is highly significant (0.12 with an SD of 0.02 and 0.14 with an SD of 0.04 in the last column), confirming once again-more strongly-that the Turkish soap operas indeed influence foreign audiences of these soap operas and attract them to Turkey. The Turkish government’s visa-waiving policy variable is also highly significant (0.31 with an SD of 0.06) in modelling the tourist inflows to Turkey. Once again, this finding supports the view that the recent visa-waiving agreements of the Turkish government have boosted the tourist flows from those countries. 5. Concluding remarks In this paper, we examine the determinants of the recent increase in inbound tourist numbers to Turkey, focussing on both the impact of exported Turkish soap operas and visa-free entry polices. We show that previously determined factors, i.e. relative CPI, bilateral trade, population, geographic and cultural factors, are effective in explaining the international tourism demand of Turkey. Since 2001, there has been a boost in the volume of Turkish soap operas exported abroad, particularly to Middle Eastern, Eastern European and North African countries. We show that soap operas exported to these countries have influenced foreign audiences’ preferences, leading to a sharp increase in the number of tourists inbound from those countries. Apart from the soap operas, the government’s visawaiving polices with other nations have also helped ordinary foreign visitors to visit Turkey more easily, contributing to the recent increase in number of visitors from these countries.

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F. Balli et al. / Tourism Management 37 (2013) 186e192 Faruk received his PhD from University of Houston in 2007. Prior to joining Massey University, he worked as a research Economist in Central Bank of Qatar, in Dubai University as Assistant Professor and in University of Houston as a Teaching Fellow. His research interests lie on the edge of international macroeconomics and international finance. His research areas mainly cover but not limited to macroeconomic aspects of international finance, international portfolio allocation, income and consumption smoothing, and modelling the volatility in asset prices. Currently, Faruk has a number of publications in mostly A/A* journals.

After completing PhD in Economics from University of Houston, TX, USA, Hatice joined to Massey University in July, 2008. She previously worked in University of Houston as a Teaching Fellow. Her research broadly focused on applied time series econometrics and international finance. Through collaboration, she was able to assist others lacking the technical skills by applying the latest techniques over a wide range of topics including finance (exchange rates and equities), macroeconomics (income smoothing and bilateral trade), aviation (airport efficiency, forecasting air travel demand), agricultural economics (dairy industry), and banking (performance of microfinance institutions), and property (windfarms and property values).

Kemal Cebeci was born in 1979 and graduated in 2002 from department of economics in Dokuz Eylul University, Turkey. He worked at Marmara University as research assistant and completed his master and PhD thesis at Marmara University. After finishing his PhD studies, he had been invited to Massey University, New Zealand as a visiting researcher and had done researches at Massey for 6 months in 2012. His main fields are tax policy, tax competition, public debt and corruption. He recently plans to focus on interdisciplinary studies and especially broadened his studies abroad with the more collaboration with the international academic environments.