Tourism for poverty reduction in developing countries: Does it really hold for Tanzania?

Abstract

ABSTRACT Despite the increase in tourism, the contribution of tourism to poverty reduction is questionable. Using secondary data with poverty index as a dependent variable, the effects of tourism value, total trade value, foreign direct investment, gross domestic product, and exchange rates were tested using econometric time series analysis for Tanzania from 1987 to 2020. The results for the long-run effects indicate all five variables significantly influence on human development as a proxy for poverty. Foreign direct investment has a negative effect, unlike the other variables. These results offer support to the Tourism Led Growth Hypothesis for a developing country like Tanzania in sub-Saharan Africa. Thus it is logical to continue promoting tourism in conjunction with the facilitation of export trade as a means of poverty reduction. Attracting foreign direct investments should continue but put into consideration policies, regulations, and the business environment that facilitate local business linkages with tourism which will reduce profit leakages.