Exploring the effects of tourism capital investment on income inequality and poverty in the European Union countries

Abstract The role of tourism in reducing inequalities has been studied and investigated in the literature. However, the specific effect of tourism investments on decreasing income inequalities, particularly given its capacity to alleviate poverty, has been little studied. Moreover, while existing research focuses on developing countries, this influence may be equally relevant in developed economies. Therefore, this article aims to understand the effects of tourism capital investment on income inequality and poverty using data from 2006 to 2019 for a sample of 24 European Union nations. To this end, the panel corrected standard errors methodology was carried out to account for data characteristics. The findings of the primary analysis suggest that tourism capital investment, international tourist arrivals, the human development index, and trade globalization contribute to mitigating income inequality and poverty across the EU region. Conversely, the age dependency ratio has a positive effect on both factors. The robustness check confirms that tourism investments-related indicators (tourism capital investment and travel and tourism direct contribution to employment) reduce income inequality and poverty in EU countries.