Revisiting the tourism-inequality nexus: evidence from a panel of developed and developing economies

ABSTRACT

This paper investigates the tourism-inequality nexus across developed and developing economies. Using the data from 1995 through 2015, we apply a dynamic panel cointegration approach to examine the relationship among income inequality, GDP per capita, trade openness, international tourism receipts, and capital investment in the travel industry. The results show that GDP per capita has a negative impact on income inequality in developed countries, while it has a positive effect on income inequality in developing countries. This study provides empirical evidence that the long-run relationship between tourism revenue and income inequality can differ across developed and developing economies. In developing economies, income inequality worsens as tourism revenue increases, start to improve once the first turning point is reached but after the second turning point begin to worsen again. These findings support an N-shape Kuznets Curve between tourism development and income inequality. However, in developed economies, tourism revenue has an insignificant effect on income inequality. In addition, capital investment in the travel industry has a significant short-run effect on income inequality for developing economies, while it is not statistically significant for developed economies. These findings provide important implications for the policies of tourism and income inequality in developed and developing economies.

KEYWORDS:

• Developed and developing economies
• income inequality
• Kuznets Curve hypothesis
• tourism development
• dynamic panel cointegration

Disclosure statement

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

Notes

1 It is worth noting that the selection of the countries was dictated largely by data availability. For example, the data in India is not available for the study period 1995–2015 and therefore, India was excluded from the analysis.