Exploring the linkage between tourism, governance quality, and poverty reduction in Latin America

Abstract

It has been of great concern for policymakers and government officials to increase the economic trajectory of living standards. Tourism development over the years is outlined in the extant literature as an alternative pathway to sustainable development. However, there has been no consensus on the combined impact of institutional quality and key macroeconomic indicators and how they moderate tourism development and eradicate poverty. Thus, there is a need to eradicate extreme poverty and achieve Sustainable Development Goals (SDGs) by the end of 2030 to remain focused on areas for policymakers and researchers. To achieve this goal, this study examines the moderating effect of governance quality on the relationship between tourism and poverty alleviation using a panel of 15 Latin American countries over the period 2003–2015 using fixed effect (FE) as an estimation technique. For soundness of analysis, we applied the Panel Corrected Standard Errors (PCSE) model estimation, the two-system generalized method of moment (GMM) model estimation in this study. Our findings show that governance quality contributes to poverty reduction, while tourism development exacerbates poverty. Interestingly, the results reveal that tourism and governance quality have complementary impacts in alleviating poverty. Further, policy prescriptions are outlined in the concluding section.