Do the size of the tourism sector and level of digitalization affect COVID-19 economic policy response? Evidence from developed and developing countries

This study investigates the link between COVID-19 economic policy response, the tourism industry, and digitalization by income levels. It also examines the moderating influence of income levels and digitalization on the underlying link between COVID-19 economic policy response and digitalization while controlling for the tourism sector. The results show that developing countries devoted fewer resources towards curbing the negative impact of the COVID-19 outbreak compared to developed countries. High-level of digital access in some developing countries, however, enabled them to introduce lower economic stimulus packages to lessen the impact of the outbreak on the tourism industry. The results also indicate that economies with a larger tourism sector accompanied by higher levels of digitalization devoted fewer public funds to COVID-19 economic stimulus packages. The influence of digitalization on the underlying link is, however, income level dependent. For example, developing economies that are more digitized, accompanied by having a larger tourism sector, allocated more public funds to economic stimulus packages relative to developed economies. This suggests that the pressure to introduce massive stimulus packages is lower when tourism providers are better prepared to use more digital tools during a pandemic, especially in developed economies.