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Gestation Period Of Investment In Croatia Tourist And Catering Sector 1960-2000

Capital goods in tourist and catering sector require a certain period of time, which from the economic point of view is not negligible, to become productive. Therefore, gestation period of investment in tourism may be defined as the period of capitalization of investment. In the paper, it is empirically examined the length of gestation period in the tourism industry in Croatia. The analysis cover 1960-2000 periods. The production function with fixed coefficients, as defined in this paper, is: Y= K/v = p K where v is parameter of capital coefficient and p is reciprocal value of capital coefficient (or reciprocal output-capital ratio). Labour does not explicitly appear in the function, but it is assumed that this factor is disposable in quantities large enough to make tourist output possible. The above production function, with given technology, represents the case of strict complementarily of production functions. Hence, the elasticity of substitution between factors is equal to zero. Total differential of the above expression by time gives: dY/dt = p dK/dt which is equal to the expression Δ Y = p I , given that dY/dt represents an increase of production in certain period of time, and dK/dt are the investment in the same period. Without the time component, this expression does not reflect the real economic situation. Namely, the relationship between the increase of production and the investment within the same period of time holds only in a special case. However, within the light of the above discussion, it seems to be necessary to relate the increase of production in period t to investment in time periods from t to t-m, where m is some finite number determined by experience. If we specify the functional form in the finite lag model to be linear in the parameters, we have Δ Yt = δ +β 0It+ β 1It-1, … , β mIt-m ; among the above relation, we choose the one capital coefficient with the best statistics. In that way, the length of gestation period of investment is discovered by econometric investigation (OLS method is used). In this paper is used nonsample information about the distributed lag weights to improve the precision of estimation. It is assume that a polynomial of degree q = 2 is sufficiently flexible to represent the smooth pattern of lag weights. The average length of gestation period which by definition has a lagged impact on tourism output growth, for time lags of 1 to 8 years, is find in the first year. According to analysis the gestation period of gross investments in tourism is exceptionally short – investment in current year significantly affected the growth of domestic product of the same year throughout 1960-2000 periods. The value of Durbin-Watson’ statistics is very close to the limiting value which indicates absence of significant autocorrelation in the model but R2 (0, 20) shows weak representatively of the model. Even the fluctuations in gross tourist and catering investments about trend are positively correlated with the fluctuations in social product about trend (coefficient of correlation = 0, 58), indicted procyclycal tendencies of gross investment. The assessed parameter for the t-period i.e. current period is also highly significant and represents the interval production coefficient. Its value of 0.164 represents the effect of one investment growth unit on an increase in the output of the Croatian tourism and catering industries. In other words, investments that affected an increase of production funds by one unit will have the increase in production by 0.164 units. The reciprocal value of the interval production coefficient in this case amounts to 6.09.

gestation period; gross investments; output; tourism and catering; distributive lag model; Croatia

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