Pathways to common prosperity: unraveling the effect of government-driven rural tourism development on household income in China

The government-driven Leisure Agriculture and Rural Tourism Demonstration County (LARTDC) policy provides a good quasi-natural experiment to determine the causal effect between rural tourism development and household income in China. Using the staggered difference-in-differences (SDID) method, we find that LARTDC policy implementation leads to a 10.82% increase in rural household income in China. To ensure the robustness of the SDID results, we conduct additional tests, such as the parallel trend assumption, Bacon decomposition, and placebo tests. Mechanism tests indicate that this income effect can be partially attributed to entrepreneurial behaviours, social networks, and infrastructure advancements. Moreover, we discover the inclusive nature of rural tourism development through heterogeneity analysis. Results show that rural tourism development benefits some disadvantaged groups, including households in less-developed regions and those with lower educational attainment, poorer health, higher dependency ratios, and limited assets.