Economic Inequality and Countries’ Dependence on Tourism: Are They Affecting Fiscal Multipliers?
Economic Inequality and Countries’ Dependence on Tourism: Are They Affecting Fiscal Multipliers?

Author(s): Marko Senekovič, Jani Beko
Subject(s): Social Sciences
Published by: Udruženje ekonomista i menadžera Balkana
Keywords: Fiscal Multiplier; Economic Inequality; Tourism; Panel VAR
Summary/Abstract: This chapter has two main objectives: first, to evaluate the impact of fiscal spending on economic activity across a broad sample of 47 countries, and second, to examine how economic inequality and tourism dependence shape the size of fiscal multipliers. To achieve these goals, a time series VAR model and a panel VAR model are employed, utilizing a dataset covering the period 1995-2021. The key findings of our empirical analysis are as follows. First, fiscal multipliers are predominantly positive in 31 countries. Second, the average fiscal multiplier is higher in countries that rely more heavily on tourism. Third, countries with more pronounced income and wealth inequality tend to exhibit larger fiscal multipliers, with the effect of wealth inequality being particularly pronounced in tourism-oriented economies. These findings support the hypothesis that greater economic inequality amplifies the effects of government spending, both generally and in the case of countries with a stronger reliance on tourism.

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