Tourism and poverty reduction in Mexico: An ARDL cointegration approach

Abstract

The objective of this paper was to investigate, with respect to the case of Mexico, the relationship between international tourism and the magnitude of poverty during the period of 1980-2017, through the use of an autoregressive distributed lags (ARDL) cointegration model with a structural break. The econometric results obtained in this paper indicate that there is a long-term relationship between international tourism and the reduction of poverty. It was found that for every 1% increase in international tourism, household consumption per capita increases 0.46% (and, therefore, poverty decreases). In the short term, it was found that a 1% increase in international tourism leads to a 0.11 % increase in household consumption per capita (a decrease in poverty). The coefficient of the error correction model indicates that 23.9% of any movement into disequilibrium is corrected within one year. To corroborate these results, a Toda-Yamamoto Granger causality test was carried out, indicating a unidirectional causality relationship from international tourism towards the reduction of poverty.