The nexus between tourism and social capital development: The role of institutional quality and globalization

Abstract

AbstractThis study shows the impact of tourism, institutional quality, globalization, renewable energy, foreign direct investment, and income inequality on social capital. This research used data from 120 countries from 1995 to 2019, which were divided into four income groups. This study used Driscoll‐Kraay regression and U‐test for empirical analysis. The U‐shaped curve found between social capital and tourism in high, upper‐middle, and low‐income countries. An inverted U‐shaped link exists between social capital and tourism in lower‐middle‐income countries. Results show a rise in social capital due to a rise in institutional quality (all panels), globalization (high, upper‐middle, and lower‐middle‐income countries), and renewable energy (high, upper‐middle, and lower‐middle‐income countries). The fall in social capital was observed due to a rise in globalization (low‐income countries), renewable energy (low‐income countries), and income inequality (high‐income countries). It is recommended to (a) promote tourism without deteriorating customs, traditions, and institutions; (b) ensure local involvement in the management, coordination, and planning of tourism activities; (c) build personal, generalized, institutionalized, and political trust; (d) globalization; and (e) reduction in income inequality. First, it uses a social capital index having multiple indicators, that is, civil society participation, freedom, power distribution, personal integrity, security, social class equality, and social rights. Second, it uses a comprehensive global tourism index, which is a combination of five tourism‐related variables. Third, it explores the effect of FDI inflow, income inequality, institutional quality, globalization, and renewable energy on social capital.