The efficiency of government promotion of inbound tourism: The case of Australia
AbstractThis paper examines the effect of tax-funded promotion of inbound tourism on domestic welfare in an open economy setting with increasing returns in the tourism industry. As inbound tourism is a way of extending the market and getting more demand to realize the implication of increasing returns, promotion can help overcome the underproduction of tourism goods. However, taxation leads to a decline in domestic residents' consumption of tourism and non-tourism goods and reduces the competitiveness of the non-tourism industry in the host country. An important result obtained is that government promotion of inbound tourism will not improve welfare unless the degree of increasing returns in the tourism industry is high enough and the national income of the foreign country multiplied by the parameter of marketing effectiveness is larger than the national income of the home country. This finding is supported by a simulation with the case of Australia.
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Bibliographic InfoArticle provided by Elsevier in its journal Economic Modelling.
Volume (Year): 29 (2012)
Issue (Month): 6 ()
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Web page: http://www.elsevier.com/locate/inca/30411
Promotion; Inbound tourism; Increasing returns; Welfare;
Find related papers by JEL classification:
- D50 - Microeconomics - - General Equilibrium and Disequilibrium - - - General
- H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
- D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
- D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
- C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
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