Tourism development and income inequality in OECD countries: New insights from method of moments quantile regression

Abstract

This paper aims to investigate the dynamic effects of tourism, economic growth, urbanization, trade openness, and globalization on income inequality in OECD countries. Using the novel method of moments quantile regression (MMQR) approach, we aim to provide new perspectives on the Kuznets curve hypothesis regarding the relationship between tourism and income inequality. The results indicate that from the 0.1 to 0.8 quantiles, the linear and cubic terms of the tourism variable positively affect income inequality, while the quadratic term has a negative impact on income inequality. These findings suggest that tourism growth is relinked with income inequality after an inverted U-shape, supporting the N-shape Kuznets curve hypothesis. Based on this evidence, tourism development may not be a sustainable solution for reducing the income gap in the long term. Our results also show a negative association between trade openness and income inequality, while urbanization is linked to unequal income distribution in most cases. Unlike other conditional mean techniques, the MMQR estimation reveals a significant linkage between globalization and income inequality from the 0.4 to 0.9 quantiles. These findings suggest that countries with stronger connections to the global economy may have more equal employment opportunities, thus decreasing income inequality.