The Influence of Tourism on Income Inequality

Abstract

This article examines the influence of tourism on income inequality on a global sample. Our analysis uses various econometric techniques for panel data including 97 countries over the period 2002–2014 categorized into three subsamples: 30 low- and lower-middle-income economies (LMEs), 25 upper-middle-income economies (UMEs), and 42 high-income economies (HIEs). Our empirical findings are interesting. First, both domestic and international tourism reduce income inequality whereas a better institutional quality increases the income inequality. Our findings also clearly indicate that international tourism contributes to the reduction of income inequalities while the national tourism requires an institutional adjustment in the LMEs and the UMEs to do so. This observation highlights the important roles of tax and transfer policies in fighting against income inequality.