Domestic versus inbound tourism in poverty reduction: evidence from panel data

ABSTRACT

The objective of this paper is to explore the effectiveness of domestic and inbound tourism in the alleviation of absolute poverty. We apply a system generalized method of moments estimation to an unbalanced panel data set covering 60 countries for the period 1995–2014. We consider different measures of poverty at two international absolute poverty lines of the World Bank and linearity and nonlinearity effects. The Tourism Statistics Database of the World Tourism Organization and the World Development Indicators Database of the World Bank are the main sources of our data. According to our results, both domestic and inbound tourism reduce absolute poverty, even extreme poverty. Nevertheless, domestic tourism shows more intensively pro-poor backward economic linkages than the inbound one. In addition, the Kuznets curve hypothesis is confirmed for inbound tourism and poverty. Therefore, policy-makers should pay special attention to the development of domestic tourism by looking for synergies that might be helpful in attracting higher spending inbound tourism too and in reducing the leakages it involves. This could improve the impact of the international income redistribution entailed by inbound tourism on the poor.

KEYWORDS:

• Domestic tourism
• inbound tourism
• poverty
• panel data
• generalized method of moments

Acknowledgements

UNWTO’s support in granting the Tourism Statistics Database is gratefully acknowledged. The authors thank the anonymous referees and the editor for their stimulating comments on a previous version of this paper. They greatly contributed to improving the final version of the paper. Usual disclaimers apply.

Disclosure statement

No potential conflict of interest was reported by the authors.

Data availability statement

Data sharing is not applicable to this article as no new data were created or analysed in this study.

Geolocation information

World.

ORCID

Carmen María Llorca-Rodríguez http://orcid.org/0000-0002-0343-9479

Rosa María García-Fernández http://orcid.org/0000-0002-0642-5216

Amalia Cristina Casas-Jurado http://orcid.org/0000-0003-1313-5011

Notes

1 Pro-poor tourism is tourism that generates net benefits for the poor. It enables the poor to actively participate in and significantly benefit from economic activity. This implies economic, social, environmental and cultural gains (Chok et al., 2007).

2 A variable is predetermined when its current values are correlated with past values of the errors or of the dependent variable. It is endogenous if its current values are correlated with contemporaneous or future values of these too (see, for example, Bank of Spain, 2011).

3 We use the collapse and lag options in the Stata xtabond2 command.

4 Slightly significant in the case of the model for the poverty gap at 1.9 a day.

5 Result slightly significant in the case of the model for the poverty gap at $3.10 a day.

Additional information

Funding

This work was supported by the Spanish Ministry of Economy and Competitiveness [grant number FFI2015-65934-R] (OPERA research project).