Household level heterogeneity in the income elasticities of demand for international leisure travel

This article deepens the understanding of household level heterogeneity of income elasticities of demand for international leisure travel. This is done through the use of Swedish household level expenditure data which together with censored quantile regression allows for estimation of income elasticities based on relative consumption levels. In addition, an analysis of how the distribution of income elasticities was affected by the 2008 financial crisis is made. Results show a great heterogeneity in the estimated income elasticities, with income elasticities being the largest for the households who consume relatively little of the good, and a small positive effect of the financial crisis on the estimated distribution of income elasticities. These results can be used by policy makers, as well as managers in the tourism industry, to predict and influence the demand of international tourism at a more detailed level. The results also go in line with theoretical predictions and give further insight in market penetration as well as an ongoing structural change in the demand for international tourism.