Beyond the scenery: Understanding the impact of rural tourism development on household consumption in China

Binhui Wei, Chunkai Zhao, Mingzhong Luo, Zhimin Jia and Hailong Xia

Review of Development Economics, 2024, vol. 28, issue 3, 1152-1191

Abstract: The positive effects of rural tourism are widely recognized, yet its influence on local household consumption has been insufficiently explored. Our study fills this gap by investigating the relationship between rural tourism development and household consumption, using the Leisure Agriculture and Rural Tourism Demonstration County (LARTDC) policy as a quasi‐natural experiment framework. Employing a staggered difference‐in‐differences (DID) method, we found that rural tourism development contributes to a 4.91% increase in per capita household consumption. The robustness of our main results is confirmed using advanced techniques such as Bacon decomposition and DIDM estimations. We attributed this positive impact to the rise in nonfarm employment and infrastructure development. Our heterogeneity analysis further reveals the inclusive nature of rural tourism, showing its significant role in improving household consumption patterns, diminishing consumption inequality, and enhancing welfare, especially in disadvantaged rural households. Further analysis confirms that greater LARTDC policy exposure may lead to higher levels of household consumption. Moreover, we revealed that rural tourism increased the freedom of employment, especially for the elderly and women; however, it did not squeeze out leisure time or hurt the quality of life and welfare. Theoretically, this study contributes to the discourse on tourism's role in fostering economic growth and social equity, addressing the patterns of high savings and low consumption in rural China. Practically, our findings suggest that post‐COVID‐19 recovery strategies in developing countries may emphasize rural tourism development, aiming to stimulate household spending and achieve balanced growth.

Date: 2024
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