The distributional and spillover impacts of tourism across regions: The case of Indonesia

Abstract

This paper examines in detail the spillover impacts of tourism on regional poverty, income inequality and inter-regional disparities within an integrated framework. Our novel approach integrates regional TSA and household micro-data within a regional computable general equilibrium model. The findings reveal that while the impacts of tourism expansion are positive at the national level, poverty in some regions can be exacerbated due to the spillover impacts from real exchange rate appreciation and resource reallocation. Another important finding is that although tourism’s impact on within-region income inequality is mostly unfavourable, it can reduce inter-regional disparity by stimulating more growth in the less developed regions. Lastly, the poverty-lowering and regional disparity-reducing effects are stronger for international tourism compared to domestic tourism. These results suggest that tourism development strategies should be integrated with the general economic development strategy, both nationally and regionally, otherwise, there is the risk of negative effects.