Domestic versus inbound tourism in poverty reduction: evidence from panel data

Abstract

The objective of this paper is to explore the effectiveness of domestic and inbound tourism in the alleviation of absolute poverty. We apply a system generalized method of moments estimation to an unbalanced panel data set covering 60 countries for the period 1995–2014. We consider different measures of poverty at two international absolute poverty lines of the World Bank and linearity and nonlinearity effects. The Tourism Statistics Database of the World Tourism Organization and the World Development Indicators Database of the World Bank are the main sources of our data. According to our results, both domestic and inbound tourism reduce absolute poverty, even extreme poverty. Nevertheless, domestic tourism shows more intensively pro-poor backward economic linkages than the inbound one. In addition, the Kuznets curve hypothesis is confirmed for inbound tourism and poverty. Therefore, policy-makers should pay special attention to the development of domestic tourism by looking for synergies that might be helpful in attracting higher spending inbound tourism too and in reducing the leakages it involves. This could improve the impact of the international income redistribution entailed by inbound tourism on the poor.