Is the Load Capacity Curve Hypothesis Valid for the Top Ten Tourism Destinations?

Abstract

Environmental deformations and changes put countries under socioeconomic stress at the global level and are, therefore, an essential topic of discussion. In this context, this paper analyzes the impact of financial development, tourism, and economic growth on three different environmental indicators using second-generation panel data techniques for the top ten tourism destinations. This study tests whether there is a U-shaped relationship between income and the load capacity factor and an inverse U-shaped link between carbon emissions, ecological footprint and income for the period 2004–2018. Despite the environmental Kuznets curve (EKC) hypothesis, which is often analyzed in this context, this empirical analysis investigates a new one—that of the load capacity curve (LCC) hypothesis. The results of the study show that the LCC and EKC hypotheses are not valid. The long-run panel estimators also indicate that international tourist arrivals are a factor that improves environmental quality, while financial development reduces the load capacity factor. Based on the results, it is recommended to support eco-friendly tourism for sustainable development.