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Land, Environmental Externalities and Tourism Development

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  • Javier Lozano Ibáñez

    (Department of Applied Economics, University of the Balearic Islands and Centre de Recerca Econòmica (CRE))

  • Javier Rey-Maquieira Palmer

    (Department of Applied Economics, University of the Balearic Islands and Centre de Recerca Econòmica (CRE))

  • Carlos Mario Gómez Gómez

    (Department of Economic Foundations and Economic History, University of Alcalá de Henares)

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    Abstract

    In a two sectors dynamic model we analyze the process of tourism development based on the accumulation of capital (building of tourism facilities) and the reallocation of land from traditional activities to the tourism sector. The model incorporates the conflict between occupation of the territory by the tourism facilities, other productive activities and availability of cultural, natural and environmental assets that are valued by residents and visitors. We characterize the process of tourism development in two settings: the socially optimal solution and a situation where the costs of tourism expansion are external to the decision makers, where externalities on residents as well as intraindustry externalities are considered. Regarding the optimal solution, we show that it is optimal to limit tourism expansion before it reaches its maximum capacity even in a context where the economic attractiveness of tourism relative to other productive sectors rise continuously. However, in this context and when all the costs of tourism development are externalities the only limit to tourism quantitative expansion is its maximum capacity determined by the availability of land. Finally, we show that excessive environmental degradation from the future generations’ point of view is not a problem of discounting the future but rather a problem of externalities that affects negatively the current and future generations.

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    Bibliographic Info

    Paper provided by Fondazione Eni Enrico Mattei in its series Working Papers with number 2004.22.

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    Date of creation: Feb 2004
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    Handle: RePEc:fem:femwpa:2004.22

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    Keywords: Intertemporal land allocation; Structural economic change; Tourism industry;

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    References

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    1. A Fleischer & Y Tsur, 2000. "Measuring the recreational value of agricultural landscape," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 27(3), pages 385-398, September.
    2. Rolf Jens Brunstad & Ivar Gaasland & Erling Vårdal, 1999. "Agricultural Production and the Optimal Level of Landscape Preservation (," Land Economics, University of Wisconsin Press, vol. 75(4), pages 538-546.
    3. Crouch, Geoffrey I., 1996. "Demand elasticities in international marketing : A meta-analytical application to tourism," Journal of Business Research, Elsevier, vol. 36(2), pages 117-136, June.
    4. Drake, Lars, 1992. "The Non-market Value of the Swedish Agricultural Landscape," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 19(3), pages 351-64.
    5. Rigoberto A. Lopez & Farhed A. Shah & Marilyn A. Altobello, 1994. "Amenity Benefits and the Optimal Allocation of Land," Land Economics, University of Wisconsin Press, vol. 70(1), pages 53-62.
    6. Tisdell, C., 1987. "Tourism, The Environment and Profit," Economic Analysis and Policy (EAP), Queensland University of Technology (QUT), School of Economics and Finance, vol. 17(1), pages 13-30.
    7. Pruckner, Gerald J, 1995. "Agricultural Landscape Cultivation in Austria: An Application of the CVM," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 22(2), pages 173-90.
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