Current Issues in Tourism

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Tourism, transport infrastructure and income

inequality: A panel data analysis of China

Jiekuan Zhang & Yan Zhang

To cite this article: Jiekuan Zhang & Yan Zhang (2022) Tourism, transport infrastructure and
income inequality: A panel data analysis of China, Current Issues in Tourism, 25:10, 1607-1626,
DOI: 10.1080/13683500.2021.1928012

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CURRENT ISSUES IN TOURISM
2022, VOL. 25, NO. 10, 1607–1626
https://doi.org/10.1080/13683500.2021.1928012

Tourism, transport infrastructure and income inequality: A panel

data analysis of China
a
Jiekuan Zhang and Yan Zhangb
a
Asean Tourism Research Centre of China Tourism Academy, Guilin Tourism University, People’s Republic of China;
b
School of Tourism Management, Guilin Tourism University, People’s Republic of China

ABSTRACT ARTICLE HISTORY

This study investigated the dynamic relationship between tourism, Received 29 March 2021
transport infrastructure, and income inequality using the novel panel Accepted 30 April 2021
data of China over 2000–2018. The results show the bidirectional
KEYWORDS
Granger causality between highway and tourism and a unidirectional Tourism; transport
Granger causality running from railway to tourism for the national infrastructure; income
sample. Tourism significantly affects China’s income inequality; inequality; Gini coefficient;
however, this impact is minimal. Besides, tourism and transport panel data analysis
infrastructure have a synergy effect on China’s income inequality. Given
the importance of tourism and transport infrastructure to economic
growth in many developing countries, this study is conducive to
broader debates over the role of transport infrastructure in tourism-
induced inclusive growth in its policy implications for national
development strategies and equitable development.

Introduction
As a significant global economic phenomenon, tourism has become one of the largest and fastest-
growing industries globally and has had a considerable impact on all aspects of the global social
economy (Danish & Wang, 2018). Therefore, tourism is duty-bound to significantly contribute to
reducing global, regional and local income inequality (Alam & Paramati, 2016), especially in the
context of that vast developing countries and underdeveloped regions regard tourism as an impor-
tant means of economic development (Mahadevan et al., 2017). Theoretically, tourism has a signifi-
cant impact on income distribution because it can absorb many jobs of different sectors and varying
income levels. Consequently, a large number of empirical studies explored the effects of tourism on
income inequality, such as Chi (2021), Kim and Kang (2020), Mahadevan and Suardi (2019) and Raza
and Shah (2017).
Another factor likely influencing income inequality is transport infrastructure. Transport infra-
structure exerts an important role in the movement of goods and people and positively impacts
regional economic and income growth (González-González & Nogués, 2019; Lovely et al., 2019).
However, this infrastructure construction is often regionally uneven. In particular, in developing
countries, unbalanced infrastructure construction significantly affects internal income inequality
(Chen & Haynes, 2017; Shi et al., 2017). Also, transport has a significant impact on tourism, especially
tourist flow (Khadaroo & Seetanah, 2008; Khan et al., 2017). Although extensive previous studies have
investigated the relationships between tourism and income inequality, tourism and transport infra-
structure, and transport infrastructure and income inequality, the relationships among tourism,
transport infrastructure and income inequality remain unclear. Moreover, no studies to date focus

CONTACT Jiekuan Zhang zhangjiekuan@126.com

© 2021 Informa UK Limited, trading as Taylor & Francis Group
1608 J. ZHANG AND Y. ZHANG

on the interaction effect of tourism and transport infrastructure on income inequality to our
knowledge.
Taking these into account, we cite China as the case study to investigate the relationship between
tourism, transport infrastructure, and income inequality using an augmented panel vector autore-
gression (VAR) model and a novel province-level dataset. China is the world’s largest developing
country and has made remarkable achievements in tourism and transport infrastructure construc-
tion. From 2000 to 2018, Chinese tourism revenue increased by 12.21 times. Tourism has become
an important driver of China’s economic growth, especially in the underdeveloped regions (Donald-
son, 2007; Zhang & Zhang, 2020b). During this period, highway mileage and railway mileage
increased by 1.89 and 0.92 times, respectively. Tourism revenue, highway mileage and railway
mileage respectively saw an average annual growth rate of 15.42%, 0.06% and 0.04%. Also, the
official data indicate that China’s Gini coefficient (a primary indicator of income inequality) has
been above 0.4 for a long time. This implies a severe income gap (Huang, 2019; Koh et al., 2020).
Given this background, urgent action is needed to explore the relationships between tourism, trans-
port infrastructure and income inequality.
The following works make the current study significantly different from existing research. First
and foremost, this study establishes an economic analysis framework consisting of tourism, transport
infrastructure and income inequality. This may be the first time the relationship between tourism
and the other two related variables is explored under such a framework. Given the importance of
transport to tourism and economic growth, we further examine the interaction effects of transport
infrastructure and tourism on income inequality. Moreover, we investigate the regional heterogen-
eity of these results.
Second, in terms of variables and data acquisition, different from the existing research, income
inequality in this study refers to the intra-regional inequality rather than the inter-regional inequality,
which is measured as the Gini coefficient. Even though some studies used the Gini coefficient, they
are all limited to the country level. There is no province-level study due to the lack of provincial Gini
coefficient data within the country. It is well known that the use of higher-resolution panel data often
means more scientific conclusions in economic analysis. In addition, existing research ignores the
time-series data of transport infrastructure. Taken together, we additionally calculate the time
series data of the province-level Gini coefficient and transport infrastructure to form a novel provin-
cial dataset.
We organize this study as follows: section 2 presents the literature review; section 3 provides the
methods for this study and the data collection. Subsequently, this study reports the results for the
stationary test, cointegration test, impulse response functions, variance decomposition, Granger
causality test, and dynamics regression. Section 5 provides the discussion and section 6 concludes
this study.

Literature review
Tourism and transport infrastructure
Tourism is closely related to transport because tourists’ large-scale movement has a strong depen-
dence on transport infrastructures such as highways and railways. Therefore, in theory, transport
infrastructure has a positive effect on tourists’ flow and thus on tourism development. For
example, Khadaroo and Seetanah (2007) and Khadaroo and Seetanah (2008) argued that transport
infrastructure is a vital determinant for tourists to choose a tourist destination and tourists are sus-
ceptible to transport infrastructure. Similarly, Zheng et al. (2016) found the positive effects of trans-
port on the urban tourism economy in developed areas; Khan et al. (2017) argued that the presence
of air transportation, railways transportation contributes to inbound tourism and indicated the
importance of transportation sector to promote tourism worldwide. In promoting inbound
tourism, the role of air transport is even more significant. Spasojevic et al. (2018) and Duval (2013)
 CURRENT ISSUES IN TOURISM 1609

evidenced the essential impact of air transport, including air route development, on international
tourism.
In addition to the direct effect of transport infrastructure on tourism, Kanwal, Rasheed, Pitafi, Pitafi
and Ren (2020) found that transport infrastructure contributes to community support for tourism,
making the community more interested in tourism participation and indirectly making tourism
development more convenient. Although the transport infrastructure may not be built with
tourism in mind, it effectively links destinations to the outside world, making it possible for more
visitors to enter, such as the development of China’s high-speed railway (Li et al., 2019; Wang
et al., 2018; Yan et al., 2014; Yin et al., 2019). Transport infrastructure, in particular, brings remote
and isolated tourist destinations into the view of tourists (Hussain et al., 2017). Besides transport
infrastructure, Ioncica et al. (2016) also found that excellent land and air transportation benefits tour-
ists. Lim and Tkaczynski (2017) and Mishra et al. (2020) evidenced the significant relationship
between tourism and transportation services. This transportation service is a measure of freight
and passenger traffic. In brief, as Duval (2020) asserted, tourism and transportation will continue
to be closely intertwined, and the impact of this relationship on tourism should undoubtedly be
an important topic for future research.

Tourism and income inequality

Existing tourism literature basically expresses income inequality from two aspects: one is income
inequality between regions, and the other is the income gap between residents in the same area,
which is commonly measured as the Gini coefficient.
Shi et al. (2020) investigated the effects of inbound tourism on Chinese urban-rural income dis-
parity and argued that inbound tourism significantly reduces urban-rural income disparity in the
western Chinese region. Kim and Kang (2020) also explored the impact of tourism revenue on
Chinese urban-rural income disparity. The authors compared the impact differences between
several autonomous regions and other provinces and found that the impact was greater in the
autonomous regions than that in other provinces. Li et al. (2016) further concluded that tourism
increases interregional income inequality and the contribution of domestic tourism is greater
than that of inbound tourism. Besides, Porto and Espinola (2019) discussed the relationship
between regional wage inequalities and tourism. They found that tourism agglomeration contrib-
utes to equal income distribution, while this impact varies significantly across different regions.
Compared with interregional income disparity, intra-regional distribution can better reflect the
impact of tourism on income inequality. We should pay more attention to how tourism in tourist
destinations affects the distribution of income. Therefore, numerous scholars investigated the
effect of tourism on intra-regional income inequality. For example, Raza and Shah (2017) and
Alam and Paramati (2016), respectively in the top 43 tourist arrival countries and 49 developing
economies, found that tourism positively affects income inequality in the early stage while the
further development of tourism will reduce income inequality. That is, there exists a Kuznets
curve hypothesis of tourism-led income inequality. A similar conclusion was supported by Uzar
and Eyuboglu (2019) in Turkey. Further, Chi (2021) supported an N-shape Kuznets Curve between
tourism and income inequality in developing economies, while tourism does not influence devel-
oped countries’ income distribution.
Besides, Marcouiller et al. (2004) indicated that tourism employment exerts a negative effect on
income inequality (i.e. the Gini coefficient). Shahbaz et al. (2020) also evidenced that tourism lowers
Malaysian income inequality, and there is a unidirectional causality that runs from tourism to income
inequality. Likewise, Lv (2019) argued that tourism has a negative long-run effect on regional income
inequality and indicated the unidirectional causality running from tourism to income inequality. Con-
trary to this result, Oviedo-Garcia et al. (2019) and Mahadevan and Suardi (2019) found tourism
revenue does not alleviate poverty, nor does it reduce inequality in income distribution in the
Dominican Republic and 13 tourism-intensive economies, respectively. Lee and O’Leary (2008)
1610 J. ZHANG AND Y. ZHANG

even identified tourism and recreation related variables (employment and income) as the factors
leading to income inequality and argued that tourism increases income inequality. Similarly,
Incera and Fernandez (2015) indicated that high-income families benefit more from tourism than
low-income families in Galicia, thus somewhat increasing income inequality. Gu et al. (2017) also
found that Macau’s Casino tourism causes higher income inequality. In addition, Jeyacheya and
Hampton (2020) identified the obstacles to residents’ distribution of tourism income, including
the loss of various livelihood capitals, such as land and business sites, and the conglomeration of
tourism enterprises.
Some other studies marginally explored income inequality in the poverty alleviation process of
tourism. For example, Mahadevan et al. (2017) found that tourism reduces poverty while increasing
income inequality in Indonesia. This indicates that poverty alleviation does not mean lower income
inequality. Qin et al. (2019) and Zhao and Xia (2020) suggested that income inequality would harm
poverty alleviation.

Transport infrastructure and income inequality

Transport infrastructure contributes significantly to moving commodities and people, which in turn
has a positive impact on regional economic growth (Banerjee et al., 2020; Shi et al., 2017). Conse-
quently, improving transport infrastructure constitutes the main instrument for reducing regional
inequality (Puga, 2002). A similar finding was supported by Enflo et al. (2018). However, González-
González and Nogués (2019) argued transportation infrastructure does not reduce the urban-rural
income disparity. China’s fast-growing transport infrastructure construction has attracted increasing
academic attention to transport’s role in changing regional inequality. Transport infrastructure has
been the key factor explaining Chinese regional economic disparity (Demurger, 2001). More specifi-
cally, Chen and Haynes (2017) and Yao et al. (2019) concluded that the development of high-speed
rail decreases regional economic disparity and thus promotes economic convergence in China. In
contrast, Bosker et al. (2015) found that China’s expressway construction has strengthened
China’s existing core–periphery economic patterns.
It is noteworthy that inequality in the above studies refers to interregional differences rather than
intraregional differences, so its measure is often per capita GDP, rather than the Gini coefficient com-
monly seen in the studies of tourism and income inequality. In this regard, Lin (2019) and Zhang and
Zhang (2021) discussed the relationships between transport infrastructure and intraregional income
inequality. Lin (2019) found that transport infrastructure reduces China’s income inequality.
However, these effects become positive in the long run. Zhang and Zhang (2021) showed that
highway decreases China’s income inequality, while railway increases it. It is additionally noteworthy
that unlike some studies on the relationship between transport infrastructure and tourism focusing
on air transport, scholars mainly concern land transport when discussing the influence of transport
infrastructure on income inequality. Few studies have involved the influence of air transport on
income inequality. Regardless of the impact on income inequality between regions and within
regions, existing studies focus on railway and highway. The possible reason is that in panel data
analysis, unlike land transport that can be expressed by line length, it is difficult to quantify aviation
infrastructure in various regions. Besides, all of the above studies do not focus on water transport,
suggesting the limited effects of water transport on tourism and income inequality.
All these above studies identified the relationship between tourism, transport infrastructure and
income inequality from a specific perspective. However, the relationship within an integrated frame-
work is still unclear. The influence mechanism of transport infrastructure in the nexus of tourism and
income inequality remains uncertain. Moreover, the measure of the above transport is not infrastruc-
ture but passenger turnover. The quantification of transport infrastructure is still not well correlated
with tourism. In particular, the measurement of income inequality is always at the national level, and
data at the provincial level is missing. In summary, the relationships between tourism, transport infra-
structure, and income inequality still require further exploration based on provincial panel data. To
 CURRENT ISSUES IN TOURISM 1611

do so, this study, citing China as the case study, investigates these relationships using a panel vector
autoregression (VAR) model estimated by the SGMM technique based on a novel province-level
dataset.

Methods and data

The GMM-PVAR model
According to the idea of the PVAR, taking tourism, transport infrastructure, and income inequality as
the endogenous variables of the system, we build the following PVAR model with fixed effects


p
Zit = b0 + bj Zit−j + vi + ut + 1it . (1)
j=1

Zi is a dependent-variables vector consisting of tourism, transport infrastructure, and income

inequality. βj is the coefficient vector to be estimated. ν is an individual effect, θ is the fixed time
effect and ε is the stochastic error term.
As a result of the lags of the explained variables, the fixed effects νi correlate with the explaining
variables. Using the typical mean-differencing operation to remove the fixed effects may cause the
deviation and inconsistency of the estimated coefficients. In order to obtain consistent and valid esti-
mates in this case, we apply the forward mean-differencing and keep the orthogonality between
lagged independent variables and transformed variables. Therefore, we use the system GMM
(SGMM) method proposed by Arellano and Bover (1995) to estimate these coefficients. The
system GMM is an extension of the prior difference GMM (Arellano & Bond, 1991). It uses the lags
of both the variables and the difference variable as the instrumental variables, which can effectively
avoid the shortcoming of the weak instrumental variables in difference GMM. Hence, the following
Eq. (2) is obtained,


k

m
DZ1,j,t = gj1h DZ1h,i,t−j + 11,i,t
j=1 h=1

.. (2)
.


k

m
DZm,j,t = gjmh DZmh,i,t−j + 1m,i,t
j=1 h=1

The left side of every function is the first difference of an endogenous variable, the right side is the k
lagged first differences of all endogenous variables and no constant. The m indicates the number of
endogenous variables.
As discussed above, both tourism and transport infrastructure may affect income inequality. In
general, there is a significant gap between the salaries of tourism and other industries, especially
in developing countries; tourism enterprises create more benefits for managers and investors but
provide low-paid jobs for front-line employees (Alam & Paramati, 2016). Also, the different influences
of transport infrastructure on the flow of people and materials lead to significant differences in the
income of transport-connected and unconnected people (Bosker et al., 2015). Therefore, we first
quantify the direct effects of tourism and transport infrastructure on income inequality. In addition
to such effects, tourism possibly indirectly affects income inequality through transport infrastructure.
In this case, it is necessary to examine the interaction effects of tourism and transport infrastructure
on income inequality. To do so, we build a dynamic panel data model as follows:
incomeinequalityit = b0 + b1 incomeinequalityit−1 + b2 tourismit + b3 transportit
(3)
+ b4 tourism × transportit + b5 controlit + 1it .
1612 J. ZHANG AND Y. ZHANG

Model (3) is also estimated by the SGMM approach. Similar to prior studies of Alam and Paramati
(2016), Raza and Shah (2017) and Uzar and Eyuboglu (2019), the effects of the economy, foreign
direct investment (FDI) and trade openness on income inequality are controlled in the Model (3). Pre-
vious studies have shown the various relationships between these three variables and income
inequality. For example, Uzar and Eyuboglu (2019), Alam and Paramati (2016) and Oviedo-García
et al. (2019) evidenced that economic growth reduces income inequality. Furthermore, Cheng
and Wu (2017) and Lv (2019) indicated the nonlinear linkages between economic growth and
income inequality. Choi (2006) showed that FDI reduces income inequality, while Uzar and Eyuboglu
(2019) and Alam and Paramati (2016) found the increasing effect. Besides, Uzar and Eyuboglu (2019)
and Chi (2021) found the different effects of trade openness on income inequality. Typically, the
economy is represented by GDP per capita. The ratio of FDI to GDP represents FDI, and trade open-
ness is represented by the ratio of total import and export to GDP.

Data collection
This empirical study depends on China’s panel annual data over the period 2000–2018 of 30 pro-
vince-level regions. Like most studies on China (e.g. Zhang & Zhang, 2019; Zhang & Zhang,
2020b; Zhao & Xia, 2020), we exclude Hong Kong, Macau, Taiwan, and Tibet due to data availability.
In order to investigate the regional heterogeneity of the dynamic relationship between tourism,
transport infrastructure, and income inequality, we further divide the Chinese 30 provinces into
three economic regions.
China is officially divided into four economic regions: the east, central, west, and northeast. We
merge the northeast into central China and finally examine three economic regions of the east,
central and west. Concretely, we determine eastern China including Beijing, Tianjin, Hebei, Shanghai,
Jiangsu, Zhejiang, Fujian, Shandong, Guangdong and Hainan, central China including Shanxi, Liaon-
ing, Jilin, Heilongjiang, Anhui, Jiangxi, Henan, Hubei and Hunan, and western China including Inner
Mongolia, Guangxi, Chongqing, Sichuan, Guizhou, Yunnan, Shaanxi, Gansu, Ningxia, Qinghai and
Xinjiang. First, technically, the northeast (i.e. Liaoning, Jilin, and Heilongjiang) needs to be merged
with the other regions because it contains fewer samples, but the SGMM estimation requires
more observations (Zhang & Zhang, 2020a). Second, our regional division differs from Shi et al.
(2020) who combined the three northeast provinces and the usual eastern provinces into the new
east. Regardless of the geographical proximity, the economic development level of the northeast
is quite different from that of the eastern provinces. On the contrary, it is closer to the central pro-
vinces. Therefore, our regional division can better reflect regional economic characteristics. Zhao and
Xia (2020) placed Liaoning in the east while Jilin and Heilongjiang in the central. But in practice, we
tend to regard the northeast as a whole region because of their similar economic and cultural
characteristics.
We select tourism revenue as the proxy of tourism. Compared with tourist arrivals, tourism
revenue can better denote the level of regional tourism development (Zhang & Zhang, 2020b).
We use mileage to represent the transport infrastructure construction of each province. We find
three indicators of railway mileage, highway mileage, and waterway mileage. As indicated above,
existing studies have neglected waterway transport when discussing the relationships between
tourism or income inequality and transport infrastructure. Moreover, the primary means of transport
for travel are railway and highway in China. Therefore, the waterway is not considered in this study.
Besides, we notice that prior studies have mainly explored the impact of air transport passenger
volume rather than air infrastructure on tourism. Moreover, as far as China’s tourism is concerned,
there is a considerable gap between the amount of passenger transport of air and road transport,
although China’s air transportation has developed rapidly, and the existence of airports is a key
factor for regional development (Florida et al., 2015). As explained above, air transport infrastructure
is challenging to be regionally divided and obtain its time series data. Besides, one of the problems
addressed in this study is moderating effects of transport infrastructure on tourism’s association with
 CURRENT ISSUES IN TOURISM 1613

income inequality, and previous studies do not discuss the influence of air transport on income
inequality; therefore, we also do not consider air transport in the framework of tourism, transport
infrastructure, and income inequality. Taking these into account, we adopt highway mileage and
railway mileage to represent transport infrastructure. We calculate the spatial density of railway
and highway separately, namely the length of railway and highway per square kilometer of land,
to measure transport infrastructure.
Gini coefficient constitutes the primary indicator to measure income inequality. The Gini coeffi-
cient describes the relative degree of deviation of the average income gap formed by population
distribution from the overall income expectation. It gives a quantitative boundary that reflects the
income gap between the rich and poor, thus objectively and intuitively indicating income inequality.
In this study, we calculate the province-level Gini coefficients to represent regional income inequal-
ity. The income of different groups in China is statistically distinguished from urban and rural per-
spectives. Accordingly, referring to Zhang and Zhang (2021), we first calculate the Gini
coefficients of urban and rural areas separately and then perform a weighted synthesis to obtain
the final provincial Gini coefficients. See the Appendix for the detailed calculations.
In brief, data on tourism revenue, highway mileage, railway mileage, population, FDI, GDP, total
import and export can be directly derived from the provincial statistics yearbooks. The Gini coeffi-
cients are indirectly calculated based on provincial urban and rural incomes derived from the pro-
vincial statistics yearbooks. Tourism revenue and GDP per capita are real values in constant prices
of 2000. Table 1 presents the descriptive statistics of tourism revenue, highway, railway, and Gini
coefficient of Chinese 30 provinces from 2000 to 2018.

Results
Stationary test
Before establishing the PVAR model, we first do a stationary test on the panel data, verifying whether
the panel data has a unit root. If there is a unit root, it means that the data is non-stationary. We
examine the panel unit root test in both cases. One is the unit root test in the case of the
common root. Such a method assumes that each cross-section data have the common unit root
process, consisting of Levin, Lin & Chu (LLC) test and the Breitung test. The other is unit root test
under individual root. Such a method assumes that each cross-section data have the individual
unit root process, consisting of Im, Pesaran and Shin (IPS) test, Fisher-ADF test, and Fisher-PP test.
Table 2 shows that the null hypothesis of unit root is accepted at the level form of variables in
terms of most tests. Hence the level variables are non-stationary. However, the null hypothesis of
unit root is rejected at the first difference form of variables. All series become stationary at the
5% significance level.

Cointegration test
Following the panel unit root test, we routinely perform panel cointegration tests to check the long-
term equilibrium relationship between tourism, transport infrastructure and income inequality.

Table 1. Descriptive statistics.

Tourism Highway Railway Gini
Mean 1923.202 0.721491 0.021609 0.412865
Median 1024.500 0.622350 0.017000 0.419550
Maximum 12511.00 2.111100 0.106200 0.534000
Minimum 11.00000 0.020800 0.001400 0.266300
Std. Dev. 2260.345 0.479821 0.018514 0.054721
Observations 570 570 570 570
1614 J. ZHANG AND Y. ZHANG

Table 2. Panel unit root tests (Individual effects, individual linear trends).
LnT Highway Railway Gini
Method Level 1st difference Level 1st difference Level 1st difference Level 1st difference
Null: Unit root (assumes common unit root process)
LLC −1.04 −9.54*** 3.46 −7.05*** −0.06 −4.41*** −6.99* −17.09***
Breitung 1.48 −7.64*** −0.59 −8.48*** 1.02 −4.27*** −0.46 −3.65***
Null: Unit root (assumes individual unit root process)
IPS 0.61 −5.78*** 3.63 −4.25*** 1.51 −6.45*** −6.07** −10.33***
Fisher-ADF 58.57 132.55*** 22.52 104.83*** 44.64 143.03*** 146.10** 200.45***
Fisher-PP 96.64*** 344.31*** 43.91 249.05*** 50.84 370.11*** 130.72** 295.44***
Notes: *** p<0.01
** p<0.05
* p<0.1

According to the cointegration test method for heterogeneous panel data proposed by Pedroni,
seven statistics are constructed based on the regression residuals for panel cointegration tests, as
shown in Table 3. The results demonstrate that five of the seven statistics pass the significance
test, which confirms the long-term equilibrium relationship among tourism, transport infrastructure
and income inequality.

Impulse responses analysis

Then we analyze the dynamic influence of a standard deviation impact of random disturbance term
on reaction variables, namely the impulse response analysis. Figures 1–4 display the impulse
response functions for different samples. The blue lines indicate the impulse response functions.
The red lines indicate the 95% confidence interval of response standard errors calculated through
a Monte Carlo simulation with 1000 repetitions. The abscissa axis represents the number of lag
periods (unit: year) of the shock; the vertical axis represents the change in the variable fluctuation
responding to the shock. Figures 1–4 illustrate that all of the impulse responses converge to zero
in ten years.
Figure 1 reports the national impulse response functions in China. Figure 1 illustrates that a posi-
tive shock to both highway and railway initially does not affect tourism and later decreases tourism
sharply. Then the impact converges to zero around the eighth period. To a positive shock to the Gini
coefficient, tourism reacts from negatively in the early stage to positively in the later stage. Following
a positive shock to tourism, the highway increases rapidly and reaches the maximum in the third
period and then gradually decreases and stabilizes in the long run. Altogether, tourism affects the
highway positively. On the contrary, the railway keeps falling and reaches its minimum in the
third period and then gradually converges to zero. A positive shock to tourism first negatively
affects the Gini coefficient but fluctuates to be insignificant afterwards.
Eastern China’s impulse response functions are reported in Figure 2, showing that a positive shock
to highway initially decreases tourism and later increases marginally, and then this effect converges
to zero. A positive shock to the railway initially increases tourism and then decreases and stabilizes in
the long run. Besides, a positive shock to the Gini coefficient marginally affects tourism between

Table 3. Panel cointegration tests.

Statistic Prob. Weighted Statistic Prob.
Panel v-Statistic 3.004964 0.0013 2.885938 0.0020
Panel rho-Statistic −0.213487 0.4155 −0.192517 0.4237
Panel PP-Statistic −4.897943 0.0000 −4.806606 0.0000
Panel ADF-Statistic −3.215977 0.0007 −3.270247 0.0005
Group rho-Statistic 1.858460 0.9684
Group PP-Statistic −5.506461 0.0000
Group ADF-Statistic −3.310468 0.0005
 CURRENT ISSUES IN TOURISM 1615

Figure 1. China’s impulse responses for the GMM-PVAR of dlnT, dhighway, drailway and dGini (lag order selected by the Schwarz
information criterion is 1)

Figure 2. Eastern China’s impulse responses for the GMM-PVAR of dlnT, dhighway, drailway, and dGini (lag order selected by the
Schwarz information criterion is 1)
1616 J. ZHANG AND Y. ZHANG

Figure 3. Central China’s impulse responses for the GMM-PVAR of dlnT, dhighway, drailway, and dGini (lag order selected by the
Schwarz information criterion is 1)

Figure 4. Western China’s impulse responses for the GMM-PVAR of dlnT, dhighway, drailway, and dGini (lag order selected by the
Schwarz information criterion is 1)
 CURRENT ISSUES IN TOURISM 1617

positively and negatively. Following a positive shock to tourism, the highway increases sharply and
reaches its maximum in the third year and later decreases rapidly and converges to zero. Altogether,
tourism positively affects the highway in eastern China. Responding to tourism shock, the railway
marginally fluctuates between increase and decrease. A positive shock to tourism first positively
affects the Gini coefficient but fluctuates to be insignificant afterwards.
Figure 3 reports the impulse response functions in central China. Figure 3 shows that a positive
shock to both highway and railway has a similar impact on tourism, compared with the national
sample. Tourism initially reacts from positively to negatively to a positive shock to the Gini coefficient
and then reaches its maximum in the fifth period. Following a positive shock to tourism, the highway
in central China shows a similar change trend, relative to the national and eastern regions. However,
a positive shock to tourism has a minimal impact on the railway. The impact of a positive shock to
tourism on the Gini coefficient fluctuates between positively and negatively and then converges to
zero around the sixth year.
Figure 4 displays the impulse responses in western China. Figure 4 shows that a positive shock to
both highway and railway initially increases tourism and then decreases and finally stabilizes.
Tourism reacts from negatively in the early stage to positively in the later stage to a positive
shock to the Gini coefficient. Following a positive shock to tourism, the highway shows a similar
change trend while a smaller amplitude, relative to the other regions. In addition, the railway initially
increases and later decreases. Compared with the eastern and central regions, tourism has a shorter-
term effect on the Gini coefficient. Responding to tourism shock, the Gini coefficient fluctuates
between increase and decrease before the sixth period.

Variance decomposition
Impulse response functions describe the impact of a shock to an endogenous variable on other
endogenous variables in the VAR model. Differently, variance decomposition analyzes the contri-
bution of each structural shock to the change of endogenous variables, usually measured by var-
iance. Therefore, the variance decomposition provides information on each random disturbance’s
relative importance that affects the variables in the VAR model. In order to test the stability of the
PVAR model and further accurately calculate the dynamic relationship between tourism, transport
infrastructure, and income inequality, a Monte Carlo simulation with 1000 repetitions is used in
this paper to perform variance decomposition of the above variables’ prediction errors, analyze
the contribution of structural shocks to the fluctuation of endogenous variables, as well as evaluate
and compare the importance of different structural shocks. Table 4 reports the results for variance
decomposition. We find that all the variance decomposition results converge before the 10th
period. In order to save space, we only give the variance decomposition results of the 5th and
10th prediction periods.
The results show that compared with the results of the 5th period, the 10th forecast period’s
results are not much changed, indicating that after five forecast periods, the dynamic relationship
between the analyzed variables in both the country and various sub-regions basically stabilize.
For the national sample, the fluctuations of all variables mainly come from themselves, and the con-
tribution of all variables to their own fluctuations is above 90%. Railway’s contribution to tourism is
4.26%, followed by the highway, while the Gini coefficient’s contribution to tourism is the smallest,
consistent with the results of the previous impulse response functions. Tourism contributes 5.59% to
the highway. By comparison, tourism contributes less than 1% to the railway and Gini coefficient. The
fluctuations of the railway and Gini coefficient are mainly influenced by themselves, with the self-
contribution being 98.50% and 98.18%, respectively.
For the subsamples, compared with other variables (except for self-influence), the railway still has
the largest contribution to tourism, with the most significant contribution in eastern China, reaching
6.19%, and the smallest in the west, only 1.16%. In the west, the contribution of the Gini coefficient to
tourism is greater than that of the highway to tourism. We note that the Gini coefficient has the
1618 J. ZHANG AND Y. ZHANG

Table 4. Results for variance decomposition of the prediction error of endogenous variables.
Variable Period S.E. DLnT Dhighway Drailway DGini
Panel A: China
DLnT 5 0.122011 93.38418 2.014019 4.261453 0.340349
10 0.122015 93.38119 2.014150 4.262423 0.342238
Dhighway 5 0.094361 5.587617 92.07341 0.629574 1.709396
10 0.094368 5.588101 92.06206 0.636971 1.712873
Drailway 5 0.001891 0.580127 0.768894 98.50488 0.146104
10 0.001891 0.580481 0.769479 98.50349 0.146554
DGini 5 0.011208 0.568518 0.320016 0.925212 98.18625
10 0.011208 0.568812 0.320284 0.927762 98.18314
Panel B: eastern China
DLnT 5 0.106195 90.85814 2.635973 6.194708 0.311175
10 0.106246 90.80746 2.653457 6.227627 0.311460
Dhighway 5 0.101296 17.05622 81.30767 1.514482 0.121629
10 0.101391 17.16715 81.18401 1.523947 0.124894
Drailway 5 0.002837 0.653924 2.579606 96.34723 0.419238
10 0.002838 0.661330 2.584592 96.33470 0.419378
DGini 5 0.011609 0.450640 4.012570 1.475623 94.06117
10 0.011613 0.473672 4.023985 1.500385 94.00196
Panel C: central China
DLnT 5 0.126306 93.26077 1.184891 5.171253 0.383084
10 0.126353 93.20556 1.186014 5.203926 0.404500
Dhighway 5 0.113375 6.884710 85.29758 1.259216 6.558497
10 0.113497 6.886067 85.13095 1.398932 6.584052
Drailway 5 0.001350 0.222066 3.938805 95.30091 0.538220
10 0.001350 0.224241 3.939277 95.29203 0.544451
DGini 5 0.013982 2.888250 0.179408 7.353607 89.57873
10 0.013985 2.905745 0.181960 7.353946 89.55835
Panel D: western China
DLnT 5 0.127402 97.46292 0.641686 1.164850 0.730545
10 0.127407 97.45952 0.642146 1.165888 0.732446
Dhighway 5 0.070576 2.318185 76.64951 18.32210 2.710204
10 0.070587 2.321586 76.64781 18.32052 2.710082
Drailway 5 0.000962 0.649305 1.117451 96.70621 1.527031
10 0.000962 0.650214 1.118007 96.70360 1.528183
DGini 5 0.008321 1.161598 2.585293 2.081239 94.17187
10 0.008322 1.162200 2.585495 2.084523 94.16778
Note: Standard Errors: Monte Carlo (1000 repetitions). Ordering: DLnT Dhighway Drailway DGini.

largest contribution to tourism in the west compared to eastern and central China. Besides, eastern
China’s tourism’s contribution to highways is as high as 17.17%, while in the west, it is only 2.32%. In
the three sub-regions, the contribution of tourism to the railway is relatively small, ranging from
0.22% to 0.66%. Tourism contributes the most to the Gini coefficient in central China (approximately
2.91%) and the lowest in eastern China (approximately 0.47%).

Granger causality test

We further lag each variable by one period to conduct the Granger causality test. The results are
shown in Table 5.
The results demonstrate that China’s tourism Granger causes the highway at the 1% significance
level. Meanwhile, the highway is the Granger cause for tourism at the 1% significance level. This
implies that there exists the bidirectional Granger causality between tourism and highway in
China, which is also found in eastern China. Besides, tourism in central China and western China
Granger causes the highway, not vice versa. Except in western China, the railway is a Granger
cause for tourism at the 1% significance level. For all the samples, tourism does not Granger
cause railway. We only find that tourism Granger causes the Gini coefficient in western China at
the 10% significance level.
 CURRENT ISSUES IN TOURISM 1619

Table 5. Results for the GMM-PVAR granger causality.

Dependent variable
Chi-sq Prob. Chi-sq Prob. Chi-sq Prob. Chi-sq Prob.
Panel A: China
Independent variables DLnT DHighway DRailway DGini
DLnT 28.458*** 0.0000 2.156 0.3402 0.351 0.8388
Dhighway 13.961**** 0.0009 1.935 0.3799 1.147 0.5635
Drailway 25.737*** 0.0000 1.5683 0.4565 4.727* 0.0941
DGini 2.245 0.3253 13.776*** 0.0010 0.817 0.6645
Panel B: eastern China
Independent variables DLnT DHighway DRailway DGini
DLnT 34.308*** 0.0000 0.771 0.6800 0.598 0.7412
Dhighway 7.076** 0.0291 2.402 0.3009 2.523 0.2832
Drailway 13.453*** 0.0012 1.980 0.3716 0.221 0.8950
DGini 0.948 0.6225 0.310 0.8562 1.124 0.5699
Panel C: central China
Independent variables DLnT DHighway DRailway DGini
DLnT 9.520*** 0.0086 0.265 0.8756 2.981 0.2252
Dhighway 4.177 0.1238 1.342 0.5112 1.202 0.5481
Drailway 8.213** 0.0165 0.473 0.7893 11.920*** 0.0026
DGini 0.261 0.8774 16.447*** 0.0003 0.681 0.7111
Panel D: western China
Independent variables DLnT DHighway DRailway DGini
DLnT 6.063** 0.0482 0.821 0.6631 1.417* 0.0921
Dhighway 1.572 0.4556 0.240 0.8865 3.854** 0.0456
Drailway 1.872 0.3921 42.515*** 0.0000 3.042 0.2184
DGini 1.514 0.4690 4.908* 0.0859 3.320 0.1901
Notes: *** p<0.01
** p<0.05
* p<0.1

Dynamic regression results

The above results show the relationships between tourism, transport infrastructure and income
inequality in terms of cointegration, impulse response, and Granger causality. On this basis, we
further quantify the effects of tourism on income inequality and the mechanism of transport infra-
structure on these effects according to Model (3). The regression results are shown in Table 6.
Table 6 shows that for the national sample, tourism significantly affects income inequality. This
result agrees with the findings of Raza and Shah (2017) and Alam and Paramati (2016) who
argued that tourism improves income inequality while contradicts the findings of Marcouiller
et al. (2004) and Shahbaz et al. (2020) who claimed that tourism reduces income inequality. Likewise,
both highways and railways significantly affect China’s income inequality. However, these effects
vary considerably across different regions within China. For instance, tourism exerts a significant
positive impact on income inequality in western China; however, these effects in eastern China
and central China are not statistically significant. The highway has significant negative effects on
income inequality in eastern China and central China; however, such effects are not significant in
western China. The railways in eastern China and western China significantly affect income inequal-
ity; however, these effects go in the opposite direction.
From a national perspective, the construction of highways and railways will help more people get
more economic income. With the rapid development of China’s land transportation infrastructure in
recent years, more people and regions are connected by highways and railways, promoting the flow
of personnel and resources, thus effectively reducing the income gap between different groups of
people. Therefore, our results show that both highway and railway significantly reduce income
inequality. This conclusion is similar to the previous impulse response analysis and also supports
the findings of Lin (2019). Railways are more subject to geographical constraints than roads.
Especially in western China, the relatively small railway density increases the income gap between
 1620
J. ZHANG AND Y. ZHANG
Table 6. Dynamic regression results and the moderating effects of transport infrastructure.
China Eastern China Central China Western China
Gini(−1) 0.525*** 0.527*** 0.441*** 0.556*** 0.498*** 0.425*** 0.511*** 0.531*** 0.493*** 0.571*** 0.554*** 0.581***
(0.021) (0.019) (0.030) (0.020) (0.126) (0.148) (0.019) (0.086) (0.077) (0.042) (0.057) (0.061)
LnT 0.004*** 0.002** 0.004*** 0.007*** −0.004 0.003 0.004*** 0.004 −0.007 0.003*** 0.004* 0.002**
(0.000) (0.001) (0.001) (0.001) (0.009) (0.003) (0.000) (0.003) (0.008) (0.001) (0.002) (0.001)
Highway −0.066*** −0.115** −0.052** −0.017
(0.006) (0.051) (0.021) (0.109)
LnT*highway 0.008*** 0.014* 0.005* 0.001
(0.001) (0.008) (0.003) (0.013)
Railway −6.538*** −3.577*** −2.805 2.671*
(0.517) (1.253) (4.408) (1.448)
LnT*railway 0.761*** 0.394*** 0.452 −0.228*
(0.058) (0.129) (0.531) (0.132)
Control variables Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes
AR(1) p-value 0.009 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.006 0.000 0.000
AR(2) p-value 0.200 0.164 0.451 0.991 0.981 0.813 0.383 0.120 0.209 0.631 0.641 0.929
Sargan test (p-value) 0.504 0.405 0.327 0.266 0.656 0.557 0.355 0.983 0.981 0.319 0.169 0.538
Notes: Std. Errors are in brackets.
*** p<0.01
** p<0.05
* p<0.1
 CURRENT ISSUES IN TOURISM 1621

the railway-connected and unconnected people, thereby increasing the income inequality. This
result is consistent with Zhang and Zhang (2021).
The interaction terms tourism*highway and tourism*railway have significant positive effects on
China’s income inequality. This implies that in China, the positive impact of tourism on income
inequality increases with the increase in highway and railway density. That is, tourism and transport
infrastructure have a synergy effect on China’s income inequality. On the contrary, in western China,
tourism’s positive impact on income inequality decreases with increased railway density.

Further discussion
The impulse response functions show the negative effects of transport infrastructure on tourism at
the national and regional levels. This suggests that compared with the current development of
China’s tourism, transport infrastructure has the excess production capacity, especially in western
China. Because substantial investment in transport infrastructure will inevitably make the investment
in other facets, such as tourism, relatively reduce. Another possible reason is that Chinese transport
construction, especially the development of expressways and high-speed railways in recent years,
has significantly increased the residents’ travel cost due to the increase in road tolls or fares. More-
over, transportation expenditure occupies a considerable part of Chinese tourism consumption, but
this is not included in tourism revenue statistics, also leading to the negative correlation between
transport infrastructure and tourism. Our findings are inconsistent with Li et al. (2019), Wang et al.
(2018), Yan et al. (2014) and Yin et al. (2019) who suggested that high-speed railways have
boosted China’s tourism economy. The main reason lies in that prior studies focused on individual
developed areas while the current study includes all regions.
Notably, our findings do not deny the contribution of transport infrastructure to tourism. The var-
iance decomposition results indicate the role of transport infrastructure, especially the railway, in
tourism accessibility, especially in eastern and central China. Transport infrastructure contributes
8.82% to tourism in the east and 6.35% in central China. With the increasingly excellent transport
infrastructure in China, tourism has become one of the residents’ daily lifestyles. The results also
show that transport infrastructure Granger causes tourism in eastern and central China.
Our results also indicate the positive impact of tourism on transport infrastructure. This finding
positively responds to Duval (2020) who asserted that the rapid development of tourism and fre-
quent tourist traffic congestion require the construction of transport infrastructure. The impulse
responses show that tourism affects the highway positively for all the samples. The variance
decomposition results demonstrate that the contribution of tourism to the highway is much
greater than the contribution to the railway. Especially in eastern China, this contribution exceeds
17%. This suggests that the rapid growth of tourism provides good opportunities for highway con-
struction. The results are also in line with a definitive conclusion that China’s tourist flow depends
mainly on short-distance highways, while long-distance railway transportation accounts for a
small proportion (Wu et al., 2000). Moreover, the results are confirmed by the Granger causality
test. Whether at the national or regional level, tourism significantly Granger causes the highway.
In particular, in the context of the rapid development of China’s current self-driving tourism (Jin
et al., 2018), the far higher car ownership rate in eastern and central China relative to the west
makes short-distance self-driving tourism significantly promote the development of highway and
the construction of many well-known tourism transport lines in eastern and central China. In con-
trast, the role of tourism in railroading is much weaker. Railway construction in China is more of a
national political or macroeconomic strategy than individually for tourism (Dong, 2018).
In terms of tourism and the Gini coefficient, the impulse responses indicate a slight effect of
tourism on income inequality for all the samples. Both in China and eastern China, tourism’s contri-
bution to income inequality is very small. The relatively large contribution is in central China, but
only about 2.91%. Regarding the causal relationship, tourism only Granger causes income inequality
in western China. These results are generally consistent with the dynamic regression results.
1622 J. ZHANG AND Y. ZHANG

Although statistically, tourism exerts a significant positive impact on China’s income inequality, the
regression coefficients of tourism are very small, both for national and regional samples. Therefore,
tourism currently does not largely affect income inequality, despite the severe income inequality in
China. Since our Gini coefficient mainly reflects the income gap between different groups, it can be
well understood from the income gap between various industries why tourism increases China’s
income inequality.
In China, the income of monopoly industries and high-tech industries’ employees is too high.
These industries are characterized by high barriers to entry, high professionalism, and high
profits. These industries include the production and supply of electricity, gas and water, finance
and insurance, information transmission, software and information technology services, scientific
research, and geological prospecting. On the contrary, industries with low incomes are characterized
by fierce competition, low added value of products, low entry barriers and labor intension. These
industries consist of farming, forestry, animal production and fishery, manufacturing, accommo-
dation, food and beverage services, and services to households. Although there is no separate
tourism in the industry classification in China, from the industry characteristics of tourism, tourism
is mainly distributed in these industries with lower wages.
For instance, in 2018, nationally, the annual per capita salary of the typical tourism sector, accom-
modation, food and beverage services of the urban non-private units, was 48,260 Yuan RMB, ranking
17th out of 18 major economic sectors. In contrast, the highest annual per capita salary of infor-
mation transmission, software and information technology services was 147,638 Yuan RMB, 3.06
times the accommodation, food and beverage services. In terms of regional comparisons, the
east, central and west figures were 2.92, 2.39 and 2.08, respectively. Also, the figures of the east,
central and west in the urban private units were 1.82, 1.37 and 1.36, respectively. These figures
could well reflect the positive impact of tourism on Chinese income inequality. Therefore, although
tourism can significantly increase overall employment and many provinces regard tourism as an
important means of economic growth and even poverty alleviation, most tourism jobs may be
unstable and low-paid, thus increasing income inequality.

Conclusions
This study explored the relationship between tourism, transport infrastructure, and income inequal-
ity based on the panel data over the period 2000–2018 in China. It is valuable for us to divide China
into three different regions, the east, central, and west, so as to investigate the regional heterogen-
eity of dynamic relationships because of the significant regional differences in tourism, transport
infrastructure, and income inequality in China’s long-term development. This article has arguably
demonstrated some pioneering work in discussing the relationship between these analyzed vari-
ables. Given the importance of tourism and transport infrastructure to economic growth in many
developing countries, this study is conducive to broader debates over the role of transport infrastruc-
ture in tourism-induced inclusive growth in its policy implications for national development strat-
egies and equitable development.
The main findings include: first, whether at the national or regional level, China’s transport infra-
structure has an overcapacity relative to tourism. Tourism has a limited influence on railway infra-
structure, but it actively contributes to highway infrastructure, especially in eastern China. Second,
tourism has a minimal impact on China’s income inequality. However, the effects of tourism on
income inequality for the whole and western China samples are significant. Third, both highway
and railway significantly moderate the effects of tourism on China’s income inequality. These inter-
action effects of the railway and tourism are significant only in western China. Moreover, for the
national sample, both highway and railway significantly reduce income inequality. Such effects
also vary remarkably across different regions.
Based on the above findings and discussion, we highlight some policy implications for Chinese
sustainable tourism development. First, transportation infrastructure has an overcapacity relative
 CURRENT ISSUES IN TOURISM 1623

to tourism development, especially in western China. From the perspective of economic cost, devel-
oping tourism through the construction of transportation infrastructure is not a wise choice,
although transportation infrastructure can effectively improve the accessibility of tourist desti-
nations. In the development of tourism in the western region, more internal skills training may be
needed to improve tourism services quality. In the eastern region, tourism development can signifi-
cantly promote highway infrastructure, which can benefit other industries outside the tourism indus-
try. Second, in the current economy, China should not place more hope on tourism to narrow the
income inequality. Moreover, with the increasing density of highway and railway, tourism will con-
tribute more to increasing income inequality in China. Therefore, considering the industrial charac-
teristics of tourism, if expecting more to play the role of tourism in reducing income inequality,
powerful government intervention is necessary, such as improving tourism’s industrial status and
giving tourism enterprises more financial subsidies to benefit more fairly and more from tourism.
This study also suggests a need for additional research to expand our research framework. First,
some important variables such as economic growth and environmental pollution can further be
included to explore the relationship between tourism, transport infrastructure, income inequality
and these variables in a more macroscopic economic and environmental system. Second,
different panel analysis techniques and other economic methods can also be employed to
explore these relationships from different sides, such as the autoregressive distributed lag model
and natural experiments. Third, we can expand our research framework to more microscopic or
macroscopic regions and discuss these relationships at different spatial scales.

Disclosure statement
No potential conflict of interest was reported by the author(s).

Funding
This work was supported by National Natural Science Foundation of China: [Grant Number 71764027].

ORCID
Jiekuan Zhang http://orcid.org/0000-0002-0598-0584

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1626 J. ZHANG AND Y. ZHANG

Appendix

We calculate the province-level Gini coefficient as follows:

1
n
G=1− (Ig-1 + Ig )×Pg , (4)
PI g=1

where P denotes the total population, I denotes the total households’ income, Ig denotes the accumulated households’
income to group g.
On this basis, we use the method of weighting proposed by Sundrum (1990) to calculate the overall household
income Gini coefficient:
ac ar ac − ar
G = Pc2 Gc + Pr2 Gr + Pc Pr , (5)
a a a
where Gc and Gr respectively denote the urban and rural Gini coefficient, Pc and Pr respectively represent the proportion
of the urban and rural population, αc and αc respectively denote the per capita income of urban and rural residents, α
denotes the regional per capita income.
It is noteworthy that in China’s statistical yearbooks, rural residents’ incomes in 2000 and 2001 were as grouped
according to a specific income interval, while from 2002 to 2018, they were divided into five equal parts according
to income level, namely the low income households (20%), lower middle income households (20%), middle income
households (20%), upper middle income households (20%) and high income households (20%). Urban residents’
incomes from 2000 to 2012 were divided into seven groups of non-equal parts according to income level, namely
the lowest income households (10%), low income households (10%), lower middle income households (20%),
middle income households (20%), upper middle income households (20%), high income households (10%) and
highest income households (10%), while from 2013 to 2018, they were divided into five equal parts similar to rural areas.