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

• Published date: 01 August 2024
• Author: Binhui Wei,Chunkai Zhao,Mingzhong Luo,Zhimin Jia,Hailong Xia
• Date: 01 August 2024
• DOI: http://doi.org/10.1111/rode.13096

REGULAR ARTICLE

Beyond the scenery: Understanding the impact

of rural tourism development on household

consumption in China

Binhui Wei

1

| Chunkai Zhao

1

| Mingzhong Luo

1

|

Zhimin Jia

2

| Hailong Xia

3

1

College of Economics and Management, South China Agricultural University, Guangzhou, Guangdong, China

2

School of Finance, Shanghai University of Finance and Economics, Shanghai, China

3

Research Center For Rural Economy, Ministry of Agriculture and Rural Affairs, Beijing, China

Correspondence

Chunkai Zhao, College of Economics and

Management, South China Agricultural

University, No. 483, Wushan Street,

Tianhe District, Guangzhou, Guangdong,

China.

Email: ckz_zhao@163.com

Funding information

National Natural Science Foundation of

China, Grant/Award Numbers: 72304102,

72373043; Philosophy and Social Science

Program Discipline Co-construction

Project of Guangdong Province,

Grant/Award Number: GD23XYJ68;

National Social Science Foundation of

China, Grant/Award Number: 23&ZD112

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 investi-

gating the relationship between rural tourism develop-

ment and household consumption, using the Leisure

Agriculture and Rural Tourism Demonstration County

(LARTDC) policy as a quasi-natural experiment frame-

work. 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 con-

firmed using advanced techniques such as Bacon decom-

position and DID

M

estimations. We attributed this positive

impact to the rise in nonfarm employment and infrastruc-

ture development. Our heterogeneity analysis further

reveals the inclusive nature of rural tourism, showing its

significant role in improving household consumption pat-

terns, diminishing consumption inequality, and enhancing

welfare, especially in disadvantaged rural households. Fur-

ther analysis confirms that greater LARTDC policy expo-

sure may lead to higher levels of household consumption.

Moreover, we revealed that rural tourism increased the

Received: 8 October 2023 Revised: 12 December 2023 Accepted: 19 February 2024

DOI: 10.1111/rode.13096

1152 © 2024 John Wiley & Sons Ltd. Rev Dev Econ. 2024;28:1152–1191.wileyonlinelibrary.com/journal/rode

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 fos-

tering 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 empha-

size rural tourism development, aiming to stimulate

household spending and achieve balanced growth.

KEYWORDS

household consumption, infrastructure construction, nonfarm

employment, rural tourism development, staggered difference-

in-differences (DID)

JEL CLASSIFICATION

D12, O21, R58, Z32

1|INTRODUCTION

In the late 19th century, rural tourism grew in Europe and North America as people sought to

escape the pollution and fast-paced life of industrial cities. Rural tourism is now described as a

major new force and is currently the fastest-growing sector of the tourism industry in terms of

providing jobs, raising incomes, and increasing economic diversity (Banerjee et al., 2018; C. Liu

et al., 2020; Zhang et al., 2022). More importantly, in some countries, rural tourism has been

considered to be an important tool for economic growth and fiscal independence (Boukas &

Ziakas, 2016). Thus, it is necessary to take some measures to promote the development of rural

tourism. The European Union (EU), for example, is considered to be the most successful region

in developing rural tourism and has given great support to European rural tourism in terms of

funding, policy, education, and training through a customized EU Fifth Framework Agreement

(Saxena et al., 2007).

China is vast in territory and abundant in natural landscapes, agricultural resources, and

traditional folklore, which offers great potential for rural tourism. With the promotion of

China's Rural Revitalization Strategy, rural tourism is seen as an effective path to promote rural

economic development and enhance the welfare of rural residents (Deng et al., 2022;X.S.

Yang & Xu, 2022). Since 2010, the Ministry of Agriculture and Rural Affairs of China and the

National Tourism Administration have been implementing the Leisure Agriculture and Rural

Tourism Demonstration County (LARTDC) policy to develop special rural tourism across the

country. There were many successful cases of revitalizing traditional villages through rural tour-

ism, attracting global attention (P. Chen, Clarke, et al., 2022). Some were even listed as world

cultural heritage sites, such as Hongcun Village and Kaiping Diaolou.

The widespread interest in rural tourism, known for its beneficial impacts like economic

growth, improved infrastructure, and enhanced quality of life (e.g., Deng et al., 2022; Hwang &

WEI ET AL.1153

Lee, 2015; X. S. Yang & Xu, 2022), has notably overlooked its influence on local consumption.

This gap in research is crucial, especially when considering the direct causal relationship

between the growth of rural tourism and household consumption in these areas. Moreover,

although existing studies explored the impact of tourism development on local consumption,

the conclusions are divergent. On the one hand, the “tourism multiplier effect”suggests a posi-

tive influence on local economies. Tourism development boosts residents' earnings due to

increased tourist expenditure, which increases consumption levels and promotes diversification

of consumption behaviors (Deng et al., 2022; Schubert & Schamel, 2021). On the other hand,

another strand of literature pointed out that tourism development may lead to an increase in

local prices, which is detrimental to local consumption growth (Gunter et al., 2022; Rivera

et al., 2016; Rosalina et al., 2021).

This conflict may stem from differences in research perspectives and potential endogeneity

issues. We try to reconcile the conflict in two ways. On one hand, from the research perspective,

we chose the particular rural tourism development in China. At the practical level, Chinese

rural households tend to save rather than consume due to a range of factors such as precaution-

ary motives, liquidity constraints, cultural backgrounds, and consumption habits (e.g., Curtis

et al., 2015; Vatsa et al., 2023; C. Zhao et al., 2022). The nonfarm employment opportunities

brought about by tourism development are likely to ease the mobility constraints of rural

households and stimulate consumption. Moreover, rural tourism development may contribute

to infrastructure construction in rural areas (Huang et al., 2023; Hwang & Lee, 2015), providing

greater consumer convenience. At the theoretical level, consumption is an important reflection

of household welfare and provides an accurate measure of household living standards

(H. Chen, Ding, et al., 2022; Meyer & Sullivan, 2023). Also, consumption is one of the main

drivers of economic growth. Thus, scholars worked to explore a range of reasons that have con-

tributed to the growth of household consumption, especially in developing countries (Emran &

Hou, 2013). Thus, it is important to actively raise the level of rural consumption and promote

the consumption welfare of rural households.

On the other hand, to mitigate endogenous issues and explore the causal relationship

between rural tourism and household consumption, we considered LARTDC policy

implementations as a quasi-natural experiment and regarded it as a proxy for rural tourism

(Huang et al., 2023). Using a large representative Chinese micro database, the National Fixed-

sited Rural Survey (NFRS), we employed the staggered DID method to effectively identify the

causal effect of rural tourism development on household consumption growth in China

(Aaronson & Mazumder, 2011; Khandker, Bakht, & Koolwal, 2009). Our estimates indicated

that LARTDC policy implementations significantly raised household consumption levels. Also,

the results showed that rural tourism had inclusive characteristics, contributing more to the

consumption welfare of disadvantaged groups and improving the consumption structure and

consumption inequality by boosting household enjoyment consumption.

In comparison to previous research, the contributions of this study were evident in the fol-

lowing aspects. First, we aimed to explore the impact of rural tourism on household consump-

tion, further complementing the literature on both the benefits of rural tourism development

(Curtis et al., 2015; Daugstad, 2008), and the measures to promote rural consumption in China

(Curtis et al., 2015; Emran & Hou, 2013; Vatsa et al., 2023; C. Zhao et al., 2022). Also, in the

debate about tourism development and local household consumption, we were more inclined

to support the positive effects of tourism development on rural residents' consumption by using

the staggered DID as our identification method. Additionally, we further considered spillover

effects based on the fundamental parallel trend and some frontier validation methods in

1154 WEI ET AL.