The Effect of Tourism on Income Inequality Reduction in Welfare States

This study explores tourism's impact on income inequality across the EU's five welfare systems from 2000 to 2021. A vector error correction model showed that increased international tourism receipts decrease income inequality by increasing the share of the mid-income, reducing the share of the highest income and minimally changing the share of the lowest income groups. Across welfare systems, tourism receipts decrease the share of the lowest income in the Nordic and Anglo-Saxon clusters; reduce inequality in the Mediterranean, and increase inequality in the Eastern European cluster. This research underscores the role of tourism in income redistribution, urging tailored policies based on regional tourism spending and welfare state capacity.