Towards the quest to reduce income inequality in Africa: is there a synergy between tourism development and governance?

ABSTRACT

Despite the growing attention on the tourism development-income inequality nexus, a conspicuous gap in the literature is that rigorous empirical works examining how good governance moderates the relationship are hard to find. Anchoring on the trickle-down theory and the tourism-led growth hypothesis, this study fills this void in the literature based on data for 48 African countries for the period 1996–2020. We provide strong evidence robust to several specifications from the GMM estimator to show that, though unconditionally both tourism development and governance reduce income inequality in Africa, the effect of the former is amplified in the presence of good economic, political and institutional governance. Particularly, we find that control of corruption and political stability are keys for propelling Africa’s tourism sector to contribute to the equalization of incomes across the continent. Policy recommendations are provided in line with SDG 10, and Aspirations 1 and 3 of Africa’s Agenda 2063.

KEYWORDS:

• Africa
• Corruption
• Governance
• Income inequality
• Tourism development
• Tourism receipts

JEL CODES:

• C33
• D31
• D63
• H11
• L5
• O55
• Z32

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

1 The 2019 World Inequality Lab Report cites Africa as one of the most unequal continents in the world, with the top 10 per cent holding 54 per cent of all incomes and the bottom 50 per cent holding less than 10 per cent. Across the regional divide, income gaps are high in Southern and Central Africa and lowest in Northern Africa.

2 Examples are Egypt, Kenya, Morocco, Namibia, Rwanda, South Africa, Tanzania, Zambia, and Zimbabwe.

3 Aspiration 3 of the Africa’s Agenda 2063 is dedicated to achieving an Africa of good governance, democracy, respect for human rights, justice and the rule of law (Africa Union, 2015).

4 This is eshrines in Aspiration of the Africa Agenda 2063.

5 Algeria (ALG); Angola (ANG); Benin (BEN); Botswana (BWA); Burkina Faso (BFA); Burundi (BDI); Cabo Verde (CPV); Cameroon (CMR); Central African Republic (CAF); Chad (TCD); Comoros (COM); Congo, DR. (COD); Congo Rep. (COG); Cote d'Ivoire (CIV); Djibouti (DJI); Egypt (EGY); Ethiopia (ETH); Gabon (GAB); The Gambia (GMB); Ghana (GHA); Guinea (GUI); Guinea-Bissau (GNB); Kenya (KEN); Lesotho (LSO); Liberia (LBR); Madagascar (MGD); Malawi (MWI); Mali (MLI); Mauritania (MRT); Mauritius (MUS); Morocco (MAR); Mozambique (MOZ); Namibia (NAM); Niger (NER); Nigeria (NGA); Rwanda (RWA); Sao Tome and Principe (STP_; Senegal (SEN); Seychelles (SYC); Sierra Leone (SLE_; South Africa (ZAF); Sudan (SDN); Tanzania (TZA); Togo (TGO); Tunisia (TUN); Uganda (UGA); Zambia (ZMB); Zimbabwe (ZWE)

6 In estimating our system GMM models, the instruments are the lags of the regressors.

7 For brevity, we will provide Appendix Table A1 (variables description), Table A2 (pairwise correlation table), and Figure A1: Average within-country governance and tourism development in Africa, 1996–2020.