Investigating the Validity of Kuznets Curve Hypothesis on Tourism and Income Inequality Relations

The decline of social welfare policies in both developed and developing countries in the late the last century has led to the issue of fair and equal distribution of income among all citizens being pushed into the background. When injustices in income distribution have become the biggest threat to social peace in today's world, in terms of economic and social benefits, tourism is considered one of the sectors supporting social and economic welfare with significant positive effects on employment generation and economic growth. However, controversy in the literature remains regarding the impacts of tourism on income distribution. We decided to analyse this impact by controlling the level of financial development and trade openness in both developed and developing countries, where the ratio of tourism revenues to national income is the highest. Using annual data from 1995-2018, the cointegration and causality analysis show the evidence that tourism impact on income distribution is dissimilar across developing and developed countries and the impact changes in different stages of sector development. The findings validate that the involvement of low- and mid-income countries' governments are crucial for fair distribution of tourism revenues through the community and coping with the issue.