Domestic Travel in the US

Paper Summary:

This paper's aim is to determine the true nature of the relationship between disposable income and domestic travel. While examining the main hypothesis of whether increases in disposable income cause an increase in domestic travel, the paper also tests the sub-hypothesis whether domestic travel is a normal or luxury good. This paper examines both of these issues concurrently using demand and supply analysis. The paper concludes that the literature survey does suggest that there is a positive relationship between personal disposable income and domestic travel. The paper also notes , however, that it should be understood that a complete and unbiased 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.

Outline:
Literature Survey
Theory and Hypothesis: Effect of Disposable Income on Domestic Travel
Graph: Domestic Travel and Disposable Income

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., The Demand for International Travel by the United States and Canada. International Economic Review, 7 (1),2006, pp. 83-92. Retrieved on March 4, 2007, 2007 from the JSTOR Database.
• Kwack, S. Effects of Income and Prices on Travel Spending Abroad, 1960 III-1967 IV. International Economic Review,13 (2) 1972, pp. 245-256. Retrieved on March 4, 2007 fro the JSTOR Database.
• McConnell, C. and B., Stanley. Macroeconomics 16th Edition. New York: McGraw-Hill, 2005.
• McConnell, C., Brue, S., and Barbiero, T. . Macroeconomics 9th Canadian Edition. Toronto: McGraw-Hill, 2002.
• Miller, Roger. Economics Today: The Micro View 13th Edition. New York, Pearson Publishers, 2006.

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