The effects of tourism on the environment: an institutional perspective

This study investigates the roles played by institutions and tourism development in protecting the environment. Inspired by the Kuznet Curve hypothesis (EKC) and the Stochastic Impacts by Regression on Population, Affluence and Technology (STIRPAT) model, we use the Panel Corrected Standard Errors model (PCSE) for a panel of 96 countries. Our results have significant contributions to both literature and policy implications. First, tourism development positively affects the environment by reducing the total CO2 emissions; this positive effect is enhanced by better institutional quality. Second, improvement in institutions, on the one hand, increases CO2 emissions through its positive effect on economic activities. Still, on the other hand, institutional quality strongly reduces emissions through its legislation and influence on non-contributing sectors such as tourism development. Consequently, better institutional quality reduces emissions. Third, the effects of institutions and tourism (and their associations) on emissions are heteroscedastic and robust across income levels.