Tourism-induced income distribution in Malaysia: a practical experience of a truly Asian economy

ABSTRACT

This paper investigates the impact of tourism on income distribution by applying income inequality function for the Malaysian economy. The study period is 1991q1 to 2017q4. The Zivot and Andrews unit root test accommodating single unknown structural break in the series is applied to test the unit root properties of the variables. The cointegration between the variables is examined by using the Bayer–Hanck combined approach, and bounds testing approach to cointegration is applied to test the robustness of cointegration results. We find that the variables are cointegrated for a long-run relationship. Tourism (tourist arrivals, tourist receipts) improves income distribution by lowering income inequality. Economic growth is positively linked with income inequality. Trade openness declines income inequality. The causality results indicate the unidirectional causality running from tourism to income distribution.

KEYWORDS:

• Tourism demand
• income distribution
• Malaysia
• cointegration analysis
• Granger causality

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

1 Giles and Perry (1998).

2 Truong et al. (2014), Incera and Fernandez (2015).

3 Akama (2002), Ryan (2002), Tosun (2000, 2006), Kibicho (2004), Scheyvens (2007), Chok, Macbeth, and Carol (2007), Nowak and Sahli (2007), UNCTAD (2007), Simpson (2008), Honeck (2008).

4 Eleventh Malaysia Plan (2015).

5 Lean et al. (2014)

6 Narayan (2005) points out that the critical in Pesaran et al. (2001) are significantly downwards and thus may produce biased outcome. The UCB and LCB by Narayan (2005) are more appropriate for small sample (T = 30 to T = 80).

7 We have also applied ADF and PP unit root tests. Their results show that the variables are integrated at I(1). Results are available upon request from authors.

8 The selection of lag length is based on AIC due to its power properties and lag 4 is selected.