Tourism and economic structural change with endogenous wealth and human capital and elastic labor supply

The purpose of this study is to introduce tourism to a small-open growth with endogenous wealth and human capital. We develop the model on the basis of the Solow- Uzawa growth model, Arrow's learning by doing, the literature of small-open economic growth models, and ideas from tourism economics. The economy consists of one service sector and one industrial sector. International tourists and domestic residents consume non-traded goods and services. We introduce endogenous land distribution between housing and supply of services. The production side is based on the traditional growth theories, while the household behavior is described by an alternative utility function proposed by Zhang (1993). We simulate the motion of the national economy and examine effects of changes in some parameters. The comparative dynamic analysis with regard to the rate of interest, the price elasticity of tourism, the global economic condition, the total productivities of the industrial and service sectors, the impact of tourism on human capital accumulation, and the propensity to save provides some important insights into the complexity of open economies with endogenous wealth and human capital.