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.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
page. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
Publisher 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.
Cited by: (explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)