The triangle of poverty, economic growth, and inequality in Central America: does tourism matter?

Abstract

Purpose – The purpose of this paper is to investigate the link between tourism, economic growth, inequality, and poverty reduction in the five countries of Central America (Costa Rica, El Salvador, Guatemala, Honduras, and Nicaragua). Design/methodology/approach – The study represents the first application of panel data modeling of poverty, economic growth and inequality as related to Central America. Unbalanced panel data are employed for the five Central America countries for the period 1980-2012. Findings – The findings reveal three results: the relationship between poverty, inequality and economic growth varies relatively very little for different measures of economic growth; the null hypothesis that economic growth and inequality does not matter is rejected at the 1 percent level, and the coefficients are highly significant and with the expected signs; tourism matters for poverty reduction in Central America. Originality/value – The paper represents the first application of panel data modeling poverty, economic growth, inequality, and tourism development in the context of Central America. Additionally, the study puts together the largest number of comparable observations on poverty, income, and income distribution for Central America during the period 1980-2012.