Providing an accelerator for neutralising inequalities through tourism development across developed and developing countries

Abstract

ABSTRACT This study uses a novel dynamic GMM approach to compare the effects of tourism development across developed and developing countries. It is the first study to examine the tourism accelerator on the alleviation of income inequality, considering the total, direct and indirect contributions. The direct contribution of tourism emerges as the most influential factor in diminishing income inequality for both developed and developing countries. We find a decrease of 0.363 and 0.077 in the Gini index, in response to a unit increase in the value of the direct variable for the respective country groups. In developed countries, a marginal increase in the indirect contribution of tourism is associated with a Gini reduction of 0.105 units, highlighting a substantial mitigating effect on income inequality. In contrast, the coefficient in developing countries is 0.041, indicating a comparatively weaker impact in addressing income inequality. Moreover, a decline of 0.171 units in the Gini coefficient is observed in response to an escalation in the total contribution of tourism in developing countries, whereas a similar scenario results in a 0.027 unit decrease in the developing country group. These findings spawn some enlightening policy recommendations that are pertinent to the economic structure of the developing economies.