Spatial Panel Data Analysis of the Relationship Between Tourism and Income Inequality

Abstract

There remains a continuous debate in the literature regarding the effect of the tourism industry on inequality. This study examines the tourism-induced Kuznets Curve Hypothesis for 34 countries in Europe, the Balkans, and Anatolia with a fourteen-year dataset using spatial panel data analysis. Results show the validity of this hypothesis. Therefore, one can conclude that the tourism industry contributes favourably to income equality only after some threshold. Moreover, findings indicate that increases in per capita income, urbanization ratio, and total labour force participation rate led to increased inequality. Therefore, to have desirable effects of the tourism industry on inclusive growth and sustainable development, investments should consider equality of income distribution.