The tourism-led growth hypothesis in Malaysia: A review of the literature

Tourism's role in economic growth has evolved from being seen as a nonproductive sector to recognizing it as a significant driver of economic development, especially during periods of economic crisis. This shift is underscored by the emerging tourism-led growth (TLG) hypothesis, first articulated in 2002, which asserts that tourism can stimulate economic activity through mechanisms such as investment in tourism infrastructure, an increase in government revenues, job creation, and poverty alleviation. This review examines the extensive empirical literature surrounding the TLG hypothesis, which consists of multiple studies deploying various methodologies across different geographic contexts. While some research supports the TLG hypothesis, finding strong links between tourism and economic growth, other studies challenge its validity, revealing mixed results. This paper highlights the nuances in the existing body of work and outlines the arguments both in favor of and against the hypothesis, emphasizing the ongoing debate within the scholarly community regarding tourism's impact on economic performance, particularly in developing countries. The review concludes with suggestions for future research directions that could further clarify the relationship between tourism development and economic growth.