Can tourism curb income inequality? Tourism Agenda 2030

Abstract

Purpose This paper aims to examine the relationship between tourism development and income inequality, closely linked to the Sustainable Development Goals, for the case of a large sample of 83 countries (and subsamples) over the period 1990–2019. Design/methodology/approach This study uses rigorous dynamic panel data analysis, namely, a Panel Vector Autoregressive Error Correction model, which takes into account both dynamic and endogenous relationships in the tourism-inequality nexus. Findings The results provide strong support that tourism development has an income inequality reducing effect (albeit relatively small with a reported elasticity of 0.05). Subsamples analysis reveals that the impact of tourism on income inequality varies and is relatively larger in developing economies and those tourist-dependent economies, as compared to developed economies. In fact, it is reported that a 1% increase in tourism development reduces income inequality by 0.46% for developing and 0.56% for tourist-dependent economies as compared to only 0.02% in developed economies. It is further observed that tourism may affect income inequality indirectly via economic growth. Originality/value This paper attempts to supplement the dearth literature on the tourism-inequality nexus by analyzing subsamples from a large data set while also using a dynamic panel data framework. The potential indirect effect of tourism on inequality via the economic growth channel is also explored.