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Growth, Conventional Production and Tourism Specialisation: Technological Catching-up Versus Terms-of-Trade Effects

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  • Simone Valente

    (WIF-ETH Zurich)

Abstract

This paper extends the ’expanding-varieties’ growth model in a two-countries-two-goods setup, and describes the dynamics of growth rates and terms of trade when the industry-based economy is the innovation leader, while the tourism-based economy is the follower (i.e. increases the number of intermediate inputs by readapting innovations developed abroad). Two types of transitional dynamics may exist: technological catching-up and technological falling-behind. Contrary to the standard result, technological catching-up by the follower is associated with lower growth rates with respect to the leader, whereas terms-of-trade effects guarantee positive growth differentials for the tourism-based economy when the technological gap with the leader increases over time. The underlying principle of ’increased relative demand’ might explain the good economic performance observed in tourism-dependent economies.

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Bibliographic Info

Paper provided by Fondazione Eni Enrico Mattei in its series Working Papers with number 2005.140.

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Date of creation: Oct 2005
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Handle: RePEc:fem:femwpa:2005.140

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Related research

Keywords: Endogenous growth; Two-country models; Technology diffusion; Trade specialization;

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Cited by:
  1. Andreas Freytag & Christoph Vietze, 2010. "Can nature promote development? The role of sustainable tourism for economic growth," Jena Economic Research Papers 2010-008, Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics.

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