Tourism Development and Income Inequality in Sub-Saharan Africa: Does Governance Matter?

Abstract

This study examines the relationship between tourism development, governance, and income inequality in 31 sub-Saharan African (SSA) countries. In the main, the study aims at examining whether tourism inflows ameliorate or exacerbate income inequality in the studied countries. The study also aims to examine whether institutional governance modulates the impact of tourism development on income inequality. For robustness, four proxies of governance indicators have been used, namely, the rule of law, voice and accountability, political stability, and government effectiveness, thereby leading to four separate specifications with four interaction variables. The Generalized Method of Moments (GMM), which accounts for endogeneity, has been used to examine this linkage. Contrary to some of the previous studies, the results of our study show that an increase in tourist arrivals leads to a decrease in income inequality in the studied SSA countries. The results also show that the favorable negative impact of tourism on income inequality could switch to an unfavorable positive impact if the following levels of governance are exceeded: 1.6842, 3.1429, and 0.7436 for voice and accountability, political stability, and government effectiveness, respectively. Policy implications are discussed.