Panel evidence on the impact of tourism growth on poverty, poverty gap and income inequality

Abstract

Using a panel of 13 tourism-intensive economies for the period 1995–2012, this paper shows that rising growth in tourism which is proxied by tourism receipts to GDP ratio has an impact on poverty conditional on the poverty measure used. Using a panel Vector Autoregression method, there is little evidence to suggest that growth in tourism reduces headcount poverty. However, the poverty gap measure shows that the amount of money needed to help the poor out of poverty is significantly reduced. Based on different types of Gini coefficient, the results fail to find an improvement in income inequality resulting from tourism growth. Alternative measures such as relative poverty and poverty gap may be considered to better assess the impact of tourism on the poor.

Keywords:

• tourism growth
• headcount poverty
• poverty gap
• Gini coefficient

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

1. Braun and Mittnik (1993) show that estimators of a VAR whose lag length differs from the true lag length are inconsistent as are the IRFs and variance decompositions derived from the estimated VAR.