Tourism diversification and income inequality in a developed economy: evidence from a dynamic regression approach

This study examines the effects of tourism diversification on income inequality in New Zealand, a developed economy highly reliant on international tourism. Rather than assuming a uniform impact of tourism on income distribution, the paper builds on theoretical insights from modernization theory and political economy perspectives to explore how diversification by source markets and travel purposes may produce varying distributional outcomes. Using a Dynamic Autoregressive Distributed Lag (DARDL) approach over the period 1979–2022, the study estimates both short-run and long-run effects of tourism diversification on the Gini coefficient, a standard measure of income inequality. The findings reveal that diversification within the Oceania and European markets is associated with increasing income inequality over time, likely due to the concentration of tourism benefits in specific regions and sectors. In contrast, diversification in the South, East, and Southeast Asian market contributes to a modest reduction in inequality, potentially reflecting broader income dispersion across regions. Purpose-based diversification, particularly in business and education travel, shows short-term equalizing effects.