The Effects of Tourism on Economic Growth and CO2 Emissions: A Comparison between Developed and Developing Economies

The objective of this study is to empirically examine the effect of tourism on economic growth and CO2 emissions across the panels of developed and developing economies around the world. The study also investigates the Environmental Kuznets Curve (EKC) hypothesis between tourism revenue and CO2 emissions. To achieve these objectives, study employs robust panel econometric techniques on balanced panel data sets of developed and developing economies. The cointegration test results confirm the long-run equilibrium relationship among the variables. Similarly, the long-run elasticities indicate that tourism has a significant positive impact on economic growth and CO2 emissions of both developed and developing economies. The results also imply the presence of EKC hypothesis between tourism and CO2 emissions. More specifically, our results indicate that after a threshold point the contribution of tourism to the CO2 emissions is negligible, and the reduction is much greater in developed economies than those of developing economies. Overall, our findings reveal that tourism plays a significant role in stimulating economic development and prosperity; though it increases CO2 emissions. However, the effect of tourism on the CO2 emissions can be minimized by adopting more sustainable tourism policies and efficient management across developed and developing economies.