The Impact of Tourism on Poverty Alleviation and Income Distribution: Evidence from Indonesia

Abstract

Tourism has important contribution towards Indonesia’s economy and the role tends to increase thorugh time. However, this study aims to delve deeper into how tourism can impact on poverty reduction and equal income distribution. The study employs Miyazawa’s input-output, econometrics, and micro simulation models. The results of the simulation show that without tourism activity, Indonesia’s poverty rate in 2014, 2015, and 2016 is expected to be 4% higher than the actuality. Tourism also contributes to reducing the depth of poverty from 2.04 to 1.21, as well as lessening the severity of poverty from 0.37 to 0.29 in 2016. This result is supported by econometric analysis showing that regions with tourism as a main economic activity have 1.5% to 3.4% lower poverty rate than those without. Further, domestic tourism activity offers a bigger contribution towards the lower income group when compared to their international counterparts. The implication of the findings towards policy making and tourism businesses is discussed.

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