New Insights into the Role of Personal Income on International Tourism

Abstract

This study aims to investigate the role of personal income in the income elasticity of tourism demand and, more specifically, the hypothesis that the richest and poorest individuals both tend to react less to changes in income than middle-class individuals, who tend to be more sensitive. To that end, this study applies different strategies within the context of a gravity model, using yearly data from 1995 to 2016 and bilateral tourism flows between 192 countries. Results show that income elasticity is determined to a significant extent by per capita income in the origin country and they confirm the inverted-U relationship between income elasticity and personal income. The study indicates that middle-income countries are more elastic than low- and high-income ones, while high-income countries display an inelastic or nonsignificant relationship.