Trade in Services and Poverty Alleviation in Mauritius

Mauritius - 14 March 2022

Although there exists a large strand of the empirical literature which focused on the impact of tourism development on the economic growth of countries (and assuming that growth will trickle down to assist in poverty alleviation), however, empirical work on the direct relationship between tourism development and poverty have been very relatively rare. This research investigates the link between tourism and poverty levels for the case of a tourist dependent economy, namely Mauritius. It employs dynamic time series analysis, namely a Vector Autoregressive framework, over the period 1987 to 2019 to account for dynamism and endogeneity issued in the tourism-poverty modelling. The findings suggest that tourism development is negatively associated with the level of poverty in Mauritius (pro-poor), although it exhibits a relatively lower impact as compared to other classical factors in the aggregate poverty model. Interestingly, tourism development is observed to be growth conducive, confirming the Tourism Led Growth hypothesis (TLG), thus providing an indirect path to poverty reduction. Finally a bi-causal relationship between tourism and poverty is reported, suggesting that tourists are sensible to some extent to the poverty level of the country in their choice destination.