Does tourism reduce income inequality?

Abstract

Investigating the impact of tourism on inequality, we employ a panel Autoregressive Distributed Lag model. With data from 1995 to 2020 across 120 countries, our Pooled Mean Group estimation reveals a positive impact. Interestingly, divergent patterns emerge when examining developed and developing countries separately. In the long run, tourism is associated with reduced inequality in developed countries but increased inequality in developing ones. However, in the short run, tourism consistently leads to increased inequality across all country types. Therefore, policy recommendations aimed at fostering equality through tourism should consider the varying effects based on the term considered and the level of development in countries. These findings are consistent across various measures of income inequality, including the Gini index, Theil index, Palma ratio, and Atkinson index.