Do natural resources and corruption curse tourism development?

ABSTRACT

This study examines the effect of resource endowment and corruption on countries’ inbound foreign tourism. Specifically, we examine whether growing resource endowment crowds out tourism industry and role of corruption in this process. For this purpose, we utilize panel data of 140 countries from 1995 through 2018. We utilize estimation technique in analysis that takes care of possible endogeneity in the models. Our results show that resource endowment and corruption lead to a reduction in tourism demand. However, the prevailing high level of corruption with resource richness may provide life-blood to the tourism sector. On the basis of these results, we argue that the ‘Dutch disease’ hypothesis for tourism is valid for the tourism sector across the world.

KEYWORDS:

• Resource curse
• Dutch disease
• tourism demand
• corruption
• natural resource endowments

Acknowledgements

Author is thankful to one of the Editors of this journal and two anonymous referees for their valuable suggestions and insights, which have substantially enriched the work.

Disclosure statement

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

Notes

1 See Lim (1997) for a detailed discussion on the issue.

2 This study utilizes control of corruption (CC) index that is provided by the International Country Risk Guide’s (ICRG). The index ranges from most corrupt (0) to least corrupt (6). We reverse the scale as we require corruption index in our analysis. Finally, the index is scaled up from 0 (least corrupt) to 100 (most corrupt) value.

Additional information

Funding

This work was supported by IIM Lucknow [grant number SM-262].