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Tourism specialization and environmental sustainability in a dynamic economy

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  • F. Cerina

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Abstract

This study focuses on the dynamic behaviour of a small open economy specialized in tourism based on natural resources when tourist services are supplied to foreign tourists who are crowding-averse and care for the environment. We analyse the steady-state properties of the model and a unique locally saddle-point equilibrium is found for both the market and the central planner solution. Then we compare the effects of two policies aiming at improving the market solution - in the first the government poses a corective tax on residents income and then redistributes the tax gains with lump-sum transfers while, in the second, the government taxes residents income and employs the tax gains in pollution abatement technology. We find that the first policy is able to direct the economy towards its first-best dynamic path but the second policy, by relaxing the dynamic constraint on the environment, yields a higher steady-state utility when the externality effects and/or the natural regeneration rate of the environmental asset are low enough. Both policies, insofar they lead to an increase in tourists willingness to pay, might work as an implicit tourist tax paid by tourists, with the difference that the first policy always leads to to this result, while the second obtains it only when tourists aversion to crowding is not too high.

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Bibliographic Info

Paper provided by Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia in its series Working Paper CRENoS with number 200602.

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Date of creation: 2006
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Handle: RePEc:cns:cnscwp:200602

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Keywords: tourism specialization; sustainability; environment; taxation; crowding; pollution abatement;

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Cited by:
  1. O. Carboni & G. Medda, 2007. "Government Size and the Composition of Public Spending in a Neoclassical Growth Model," Working Paper CRENoS 200701, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia.
  2. Rinaldo Brau & Adriana Di Liberto & Francesco Pigliaru, 2011. "Tourism and Development: A Recent Phenomenon Built on Old (Institutional) Roots?," The World Economy, Wiley Blackwell, vol. 34(3), pages 444-472, 03.
  3. S. Giannoni & F. Cerina, 2008. "Pollution Adverse Tourists and Growth," Working Paper CRENoS 200822, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia.
  4. Giannoni, Sauveur, 2011. "On the economic rationality of fluctuations in tourism frequentation at nature-based destination," MPRA Paper 29518, University Library of Munich, Germany.
  5. Schubert, Stefan Franz, 2009. "Coping with Externalities in Tourism - A Dynamic Optimal Taxation Approach," MPRA Paper 16736, University Library of Munich, Germany.
  6. Guido Candela & Paolo Figini, 2010. "Destination Unknown. Is there any Economics Beyond Tourism Areas?," Review of Economic Analysis, Rimini Centre for Economic Analysis, vol. 2(3), pages 256-271, September.
  7. G. Marletto, 2006. "La politica dei trasporti come politica per l’innovazione: spunti da un approccio evolutivo," Working Paper CRENoS 200605, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia.
  8. Theodore Panagiotidis & Thomas Panagiotou & Maurizio Mussoni, 2012. "Tourism Led Growth: Evidence from Panel Cointegration Tests," Working Paper Series 74_12, The Rimini Centre for Economic Analysis.
  9. F. Cerina, 2012. "Endogenous Growth and Sustainable Tourism," Working Paper CRENoS 201234, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia.
  10. Brida, Juan Gabriel & London, Silvia & Rojas, Mara, 2012. "El turismo como motor de crecimiento económico: impacto de las preferencias intertemporales de los agentes
    [The tourism as economic growth engine: the impact of the agents time preferences]
    ," MPRA Paper 36607, University Library of Munich, Germany.

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