Tourism expansion and regional economic development in Saudi Arabia: An empirical analysis of the subnational tourism–development nexus under Vision 2030

Abstract

This study examines the relationship between tourism expansion and regional economic development across the thirteen administrative regions of Saudi Arabia over the period 2014–2024, a decade that spans the launch of Vision 2030 and the structural reorientation of the Kingdom away from hydrocarbon dependence. Drawing on export-base theory, endogenous growth theory, and the tourism-led growth hypothesis, a balanced panel is analyzed using a panel autoregressive distributed lag (ARDL) error-correction framework complemented by fixed-effects estimators with Driscoll–Kraay standard errors. Tourism expansion is proxied by tourism receipts, tourist arrivals, hotel capacity, and tourism employment share, while regional economic development is captured by regional gross domestic product per capita and regional employment growth. Infrastructure quality and human capital are specified as moderating conditions, and foreign direct investment, government capital expenditure, inflation, population size, and trade openness enter as controls. Panel unit-root tests confirm that the series are integrated of order one, and residual-based cointegration tests establish a stable long-run equilibrium. The results indicate that tourism expansion exerts a positive and statistically significant effect on regional economic development in both the short run and the long run, that the effect is amplified where infrastructure quality and human capital endowments are stronger, and that the estimated relationships are robust to alternative dependent variables, alternative tourism proxies, two-way fixed effects, and cross-sectionally consistent standard errors. The error-correction term is negative and significant, implying rapid adjustment toward equilibrium after short-run shocks. The findings furnish evidence-based guidance for the spatially balanced diversification agenda embedded in Vision 2030 and underscore the complementarity between tourism promotion and investment in enabling infrastructure and skills.