Disposable Income and Domestic Travel

Paper Summary:

This paper examines the main hypothesis of whether increases in disposable income, cause an increase in domestic travel, and the sub-hypothesis of whether domestic travel is a normal or luxury good. The paper explains that the main aim is to determine the true nature of the relationship between disposable income and domestic travel. The paper further explores the effect of disposable income on domestic travel. In conclusion, the paper shows that a complete model of domestic travel entails looking at all determinants of travel as a supposed explanatory variable before the relationship between personal disposable income and domestic travel can be analyzed and this is necessary so that the relationship coefficients are unbiased.

Outline:
Literature Survey
Theory and Hypothesis: What is the Effect of Disposable Income on Domestic Travel

From the Paper:

"Research that has centered on domestic travel, began as early as the 1960's, especially in wake of the fact that in many developed countries citizens were spending excessively on travel. Empirical studies by Gray found that disposable income was a major determinant of travel. Gray's analysis was an econometric model that included explanatory variables such as the foreign exchange rate, fare payments abroad, and travel spending by local residents. Gray's work also included another element that was absent in other papers, that is, Gray found that the prices of goods and services while traveling were an important determinant of travel. This particular model is important to the testing of the relevant hypotheses since, it gives a clear picture as to what the complete model of domestic travel should entail as explanatory variables. It is therefore less likely to get a biased determinant if all the necessary independent variables are included in the model; Gray's research paper dictates what these variables should be."

Sample of Sources Used:

• Gray, H. (1966). The Demand for International Travel by the United States and Canada. International Economic Review, 7 (1), pp. 83-92. Retrieved on February 4, 2007 from the JSTOR Database.
• Kwack, S. (1972). Effects of Income and Prices on Travel Spending Abroad, 1960 III-1967 IV. International Economic Review,13 (2), pp. 245-256. Retrieved on February 4, 2007 fro the JSTOR Database.
• McConnell, C. and B., Stanley (2005). Macroeconomics 16th Edition. New York: McGraw-Hill.
• Vilasuso, J. and Menz, F. (1998) . Domestic Price, (Expected) Foreign Price, and Travel Spending by Canadians in the United States. The Canadian Journal of Economic, 31(5), pp. 1139-1153. Retrieved on February 4, 2007 from the JSTOR Database.

More papers on Disposable Income and Domestic Travel:

• Analytical Essay # 132147 : "Domestic Travel in the US"
• Analytical Essay # 131703 : "Is Domestic Travel a Normal Good?"
• Research Paper # 102272 : "Domestic Travel in the US"

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