Endogenous Growth and Sustainable Tourism

I build a dynamic general equilibrium model of a small economy specialized in tourism where visitors are attracted by the stock of existing environmental assets, and the stock of tourism and leisure facilities. Residents, at any date, choose the level of consumption, the number of visitors, and the quantity of resources to be devoted to abatement of pollution, the latter being generated by the existing stock of tourism facilities and by the flow of tourists. I analyze the balanced growth path properties of this economy, and focus on the sensitiveness of its qualitative dynamic behaviour, according to different subsets in the parameters space. The model is able to perform both endogenous growth and sustainability of the environmental resource. We analyse the condition for this result to hold and we find that when tourists preferences are greener (i.e. they care for environmental quality and they are crowding-adverse), the economy generally grows faster. Finally, we develop the transitional dynamics analysis in the case of constant environmental quality in the long-run. Given its generality and flexibility, we believe our model may serve as a workhorse model suitable to be used as an instrument to perform for many relevant policy exercises.