Tourism-Driven Economies and Income Disparity: Insights From a Regression Discontinuity Design
Keywords:
overtourism, developmental strategy, income distribution, regression discontinuity design (RDD), economic inequality
Abstract
This paper aims to answer two questions: (1) Does overtourism incline countries to favorise the capital asset holder instead of workers in income distribution? (2) Does income inequality come hand in hand with overtourism? Employing Kaldor's theory of income distribution, this study adapts its theoretical framework to assess countries with a specialization in tourism. The analysis encompasses data from 115 developed countries over the period of 2000 to 2019. A Regression Discontinuity Design (RDD) methodology is utilized for the empirical investigation, categorizing key variables based on the exposure of a country's unit to a tourism-focused developmental strategy. The study reveals that adopting overtourism as a developmental strategy has led to increased inequality, characterized by a rising capital share and a declining labor share over time. Evidence supporting these findings is presented through both parametric and non-parametric Regression Discontinuity Design (RDD) analyses. Robustness checks and placebo tests corroborate these results.
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References
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Thistlethwaite, D.L., Campbell, D.T. (1960). Regression-discontinuity analysis: An alternative to the ex post facto experiment. Journal of Educational psychology, 51(6), 309-317. DOI: 10.1037/h0044319.
Walmsley, A., Koens, K., Milano, C. (2022). Overtourism and employment outcomes for the tourism worker: impacts to labour markets. Tourism Review, 77(1), 1-15. DOI: 10.1108/TR-07-2020-0343.
Wattanakuljarus, A., Coxhead, I.（2008). Is tourism― based development good for the poor?: A general equilibrium analysis for Thailand. Journal of Policy Modeling, 30, 929-955. DOI: 10.1016/j.jpolmod.2008.02.006.
Zeileis, A. (2023). Penn World Table (Version 10.x). Retrieved from the Groningen Growth and Development Centre. Available in R package pwt10.0, version 10.01-0.
Arel-Bundock, V. (2022). WDI (version 2.7.8) [R package]. Retrieved from https://CRAN.R-project.org/package=WDI.
Bhaduri, A., Marglin, S. (1990). Unemployment and the real wage: the economic basis of contesting political ideologies, Cambridge Journal of Economics, 14(4), 375 – 393. https://www.jstor.org/stable/i23597869.
Blake, A., Arbache, J. S., Sinclair, M. T., Teles, V. (2008). Tourism and poverty relief. Annals of Tourism Research, 35(1), 107-126. DOI:10.1016/j.annals.2007.06.013.
Calonico, S., Cattaneo, M.D., Farrell, M. H. (2018). On the effect of bias estimation on coverage accuracy in nonparametric inference. Journal of the American Statistical Association, 113(522), 767-779. DOI: 10.1080/01621459.2017.1285776.
Calonico, S., Cattaneo, M.D., Farrell, M.H. (2020). Coverage error optimal confidence intervals for local polynomial regression. Annals of Statistics, 48(3), 1258-1282. DOI: 10.1214/19-AOS1848.
Calonico, S., Cattaneo, M. D., Titiunik, R. (2014). Robust nonparametric confidence intervals for regression-discontinuity designs. Econometrica, 82(6), 2295-2326. DOI: 10.3982/ECTA11757.
Calonico, S., Cattaneo, M. D., Farrell, M. H., Titiunik, R. (2019). Regression discontinuity designs using covariates. The Review of Economics and Statistics, 101(3), 442-451. DOI: 10.1162/rest_a_00840.
Candela, G., Figini, P. (2012). The economics of tourism destinations (pp. 73-130). Springer Berlin Heidelberg.
Cook C. (1995). Savings rates and income distribution: further evidence from LDCs. Applied Economics, 27(1), 71-82. DOI: 10.1080/00036849500000009.
Dao, M. C., Das, M. M., Koczan, Z., Lian, W. (2017). Why is labor receiving a smaller share of global income? Theory and empirical evidence. International Monetary Fund, 1-72.
Das, A., Martin, F. (2012). Kaldor’s theory of distribution: an information-theoretic approach. International Journal of Operational Research, 15(2), 136-146. DOI: 10.1504/IJOR.2012.048864.
Dünhaupt, P. (2014). An empirical assessment of the contribution of financialization and corporate governance to the rise in income inequality. IPE Berlin Working Paper No. 41/2014, 1-36. Berlin, Institute for International Political Economy.
Fang, J., Gozgor, G., Paramati, S. R., Wu, W. (2021). The impact of tourism growth on income inequality: Evidence from developing and developed economies. Tourism Economics, 27(8), 1669-1691. DOI: 10.1177/1354816620934908.
Granger, C. W. (1999). Empirical modeling in economics: Specification and evaluation. Cambridge University Press. 1-99.
Groningen Growth and Development Centre (2023). Penn World Table 10.01, DataverseNL. DOI:10.34894/QT5BCC.
Hahn, J., Todd, P., Van der Klaauw, W. (2001). Identification and estimation of treatment effects with a regression-discontinuity design. Econometrica, 69(1), 201-209. DOI: 0.1111/1468-0262.00183.
Hein, E., Mundt, M. (2013). Financialization, the financial and economic crisis, and the requirements and potentials for wage-led recovery. In Wage-led growth: an equitable strategy for economic recovery, 153-186. London: Palgrave Macmillan UK.
Imbens, G. W., Kalyanaraman, K. (2012). Optimal Bandwidth Choice for the Regression Discontinuity Estimator. The Review of Economic Studies, 79(3), 933-959. DOI: 10.1093/restud/rdr043.
Imbens, G. W., Lemieux, T. (2008). Regression discontinuity designs: A guide to practice. Journal of econometrics, 142(2), 615-635. DOI:10.1016/j.jeconom.2007.05.001.
Kaldor, N. (1956). Alternative Theories of Distribution. The Review of Economic Studies, 23, 83-100. DOI: 10.2307/2296292.
Krueger, Alan B. 1999. Measuring Labor's Share. The American Economic Review, 89, 45-51. https://www.jstor.org/stable/i300829.
Lee, S. (2009). Income inequality in tourism services-dependent counties. Current Issues in Tourism, 12(1), 33-45. DOI: 10.1080/13683500802248001.
Lee, D. S., Card, D. (2008). Regression discontinuity inference with specification error. Journal of Econometrics, 142(2), 655-674. DOI: 10.1016/j.jeconom.2007.05.003.
Lee, David S. Lemieux, T. (2010). Regression Discontinuity Designs in Economics. Journal of Economic Literature, 48(2), 281-355. DOI: 10.1257/jel.48.2.281.
Luebker, M. (2007). Labour Shares. Technical Brief No. 1., 1-15. Geneva: ILO.
Marcouiller, D.W., Kim, K.K., Deller, S.C. (2004). Natural amenities, tourism and income distribution. Annals of Tourism Research, 31(4), 1031–1050. DOI: 10.1016/j.annals.2004.04.003.
Marglin, S.A., Bhaduri, A. (1991). Profit squeeze and Keynesian theory. In Nicholas Kaldor and Mainstream Economics: Confrontation or Convergence? (pp. 123-163). London: Palgrave Macmillan UK.
McCrary, J. (2008). Manipulation of the Running Variable in the Regression Discontinuity Design: A Density Test. Journal of Econometrics, 142(2), 698-714.
Molero-Simarro, R. (2017). Growth and inequality revisited: the role of primary distribution of income. A new approach for understanding today’s economic and social crises. Cambridge Journal of Economics, 41(2), 367-390. DOI: 10.1093/cje/bew017.
Onaran, Ö., Galanis, G. (2013). Is aggregate demand wage-led or profit-led? A global model. In Wage-Led Growth: An Equitable Strategy for Economic Recovery (pp. 71-99). London: Palgrave Macmillan UK.
Palley, T.I. (2013). A Kaldor–Hicks–Goodwin–Tobin–Kalecki model of growth and distribution. Metroeconomica, 64(2), 319-345.
Peterson, R.R. (2023). Over the Caribbean Top: Community Well-Being and Over-Tourism in Small Island Tourism Economies. Int. Journal of Com. WB 6, 89–126. DOI: 10.1007/s42413-020-00094-3.
Razmi, A. (2016). Demand regimes and income distribution reconsidered in an open economy portfolio balance framework. Journal of Post Keynesian Economics, 39(4), 516-538. DOI: 10.1080/01603477.2016.1221317.
Ryoo, S., Kim, Y. K. (2014). Income Distribution, Consumer Debt and Keeping up with the Joneses. Metroeconomica, 65(4), 585-618. DOI: 10.1111/meca.12052.
Ryoo, S. (2015). Inequality of Income and Wealth in the Long Run: A Kaldorian Perspective. Metroeconomica, 67(2), 429–457. DOI: 10.1111/meca.12096.
Stockhammer, E. (2013). Why Have Wage Shares Fallen? An Analysis of the Determinants of Functional Income Distribution. In M. Lavoie, E. Stockhammer (Eds.), Wage-led Growth (Advances in Labour Studies, pp. 40–70). Palgrave Macmillan. DOI: 10.1057/9781137357939_3.
Storm, S., Naastepad. C.W.M. (2013). Wage-led or Profit-led Supply: Wages, Productivity and Investment. In Wage-led Growth, edited by Marc Lavoie and Engelbert Stockhammer, 100–124. Advances in Labour Studies. London: Palgrave Macmillan. DOI: 10.1057/9781137357939_5.
Thistlethwaite, D.L., Campbell, D.T. (1960). Regression-discontinuity analysis: An alternative to the ex post facto experiment. Journal of Educational psychology, 51(6), 309-317. DOI: 10.1037/h0044319.
Walmsley, A., Koens, K., Milano, C. (2022). Overtourism and employment outcomes for the tourism worker: impacts to labour markets. Tourism Review, 77(1), 1-15. DOI: 10.1108/TR-07-2020-0343.
Wattanakuljarus, A., Coxhead, I.（2008). Is tourism― based development good for the poor?: A general equilibrium analysis for Thailand. Journal of Policy Modeling, 30, 929-955. DOI: 10.1016/j.jpolmod.2008.02.006.
Zeileis, A. (2023). Penn World Table (Version 10.x). Retrieved from the Groningen Growth and Development Centre. Available in R package pwt10.0, version 10.01-0.
Published
2024-06-27
How to Cite
Šergo Z., Gržinić J., & Ilak Peršurić A. S. (2024). Tourism-Driven Economies and Income Disparity: Insights From a Regression Discontinuity Design. LeXonomica, 16(1), 111-142. https://doi.org/10.18690/lexonomica.16.1.111-142.2024
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Articles