Does tourism increase CO2 emissions and health spending in Mexico? New evidence from nonlinear ARDL approach

Abstract

This study investigates the nexus between tourism, CO₂ emissions and health spending in Mexico. We applied a nonlinear ARDL approach for the empirical analysis for the time period 1996-2018. Mexico receives a large number of tourists each year, tourism improves foreign exchange earnings and contributes positively to the economic growth. However, tourist activities impose a serious environmental cost in terms of CO₂ emissions which increase health spending. The empirical findings suggest that tourism leads to CO₂ emissions which resultantly causes a high level of health spending in Mexico. Both short-run and long-run findings reported a significant positive association between tourism, CO₂ emissions, and health expenditures. Therefore, the government needs legislation to reduce CO₂ emissions, besides the use of renewable energy could also help to reduce the CO₂ emissions and health expenditures in society. This study does not support to reduce the health expenditure, rather it suggests optimal utilization of the funds allocated to the health sector.

Keywords: CO2 emissions; Mexico; health spending; nonlinear ARDL; tourism.