International Tourism and Poverty Alleviation: Cross-Country Evidence Using Panel Quantile Fixed Effects Approach

Abstract

This paper evaluates the impact of tourism on poverty alleviation using a new panel quantile fixed effects method that allows regressors to affect the entire conditional distribution of the dependent variable providing substantial information gains. Our results show statistically significant negative marginal effects of tourism on both absolute poverty measures and Gini income inequality across all quantiles, including the poorest 10%. We also find evidence that international tourism can mitigate the slow improvement in domestic income level for poverty reduction. From a policy perspective, our findings can provide insights into developing targeted tourism policies and strategies to achieve better solutions on poverty alleviation. We also call for special attention to policymakers in developing countries to continue working on tourism product differentiation and targeting a smaller but reachable market in the post COVID-19 recovery era, to prevent the adverse effect of the worldwide income growth stagnation on their poverty rates.