Tourism, Inequality, and Inflation: Unraveling Economic Dynamics for Sustainable Growth

Abstract

This study investigates the intricate relationships between income inequality (measured by the GINI index), international tourism expenditure (ITE), and inflation (consumer price index, CPI) across 30 countries from 2012 to 2021, using panel data econometrics. Employing advanced techniques like GMM, CS-ARDL, and cointegration tests, the analysis reveals nuanced dynamics: while tourism spending weakly correlates with inflation, income inequality exhibits a more pronounced, albeit inconsistent, impact. Fixed-effects models highlight significant short-term adjustments, but long-term equilibrium remains elusive. Key findings suggest that tourism stimulates economic activity but fails to uniformly mitigate inequality, while inflation disproportionately affects lower-income groups. Methodologically, the study leverages robust statistical tools (STATA) to address endogeneity and cross-sectional dependence, yet limitations include data constraints and omitted variables like political or technological factors. Policy recommendations emphasize progressive taxation, targeted social programs, and inflation control to foster equitable growth. Future research should expand geographic scope and integrate additional macroeconomic indicators. Aligned with SDGs 8 (Decent Work), 10 (Reduced Inequalities), and 12 (Responsible Consumption), this work underscores the need for balanced policies to harness tourism’s potential while addressing systemic disparities.