TOURISM-DRIVEN ECONOMIES AND INCOME DISPARITY : INSIGHTS FROM A REGRESSION DISCONTINUITY DESIGN

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 nonparametric Regression Discontinuity Design (RDD) analyses. Robustness checks and placebo tests corroborate these results.