Exploring the tourism-CO2 emissions-real income nexus in E7 countries: accounting for the role of institutional quality

Abstract

The purpose of this study is to explore the long-run and causality relationship between tourism development and the real income level in an environmental Kuznets Curve (EKC) framework for emerging industrialised economies (E7). The newness of our study to the tourism literature is the inclusion of institutional quality and tradeto the mix. The inclusion of the additional variables in the econometrics setting is worthwhile to circumvent omitted variable bias. Second-generation panel estimation techniques, in conjunction with the Driscoll-Kraay robust estimator, have been employed to accommodate cross-sectional dependency in the panel under review, as well as for robustness of coefficients and estimates. The Empirical results affirm the presence of the EKC phenomenon and tourism-induced emission in E7 economies, thereby suggesting that sustainable tourism has a deteriorating impact on economic growth in the examined industrialised countries. Similarly, real GDP per capita and non-renewable energy also dampen the quality of the environment, as indicated by the robust regression of AMG and CCEMG. Hence, an increase in nonrenewable energy and tourism demand increases CO2emission in E7 economies. Additionally, we observe that the quality of institution improves the quality of the environment, thus, indicating that the role of good governance (institutional quality) improves the quality of the environment in E7. Furthermore, there is a need for a paradigm shift to sustainable tourism development alongside the adoption of the polluters pay principles to mitigate the adverse implications of the consumption of non-renewable energy. More insights are presented in the concluding section.