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Coping with Externalities in Tourism - A Dynamic Optimal Taxation Approach

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Author Info
Schubert, Stefan Franz

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Abstract

The paper studies optimal taxation (subvention) when tourism is associated with „multiple externalities“, using a simple dynamic model of a small open economy, which is completely specialized in the production of tourism services and populated by a large number of intertemporally optimizing agents. Depending on the volume of tourism production, the externality can be either positive or negative. We show that the first best optimum, achieved by a central planner, recognizing the externality, can be replicated in a decentralized economy by using a time-varying tax rate. This ensures that (i) the steady state of the first best optimum is reached and that (ii) the speed of convergence to steady state is socially optimal.

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File URL: http://mpra.ub.uni-muenchen.de/16736/
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Publisher Info
Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 16736.

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Date of creation: Jul 2009
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Handle: RePEc:pra:mprapa:16736

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Related research
Keywords: tourism demand; externalities; dynamic optimal taxation;

Find related papers by JEL classification:
H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
R13 - Urban, Rural, and Regional Economics - - General Regional Economics - - - General Equilibrium and Welfare Economic Analysis of Regional Economies
F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies

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References listed on IDEAS
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.:
  1. Fabio Cerina, 2006. "Tourism specialization and environmental sustainability in a dynamic economy," Working Paper CRENoS 200602, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia. [Downloadable!]
  2. Turnovsky, Stephen J, 1997. "Equilibrium Growth in a Small Economy Facing an Imperfect World Capital Market," Review of Development Economics, Blackwell Publishing, vol. 1(1), pages 1-22, February. [Downloadable!] (restricted)
  3. Brock, William A & Turnovsky, Stephen J, 1981. "The Analysis of Macroeconomic Policies in Perfect Foresight Equilibrium," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 22(1), pages 179-209, February. [Downloadable!] (restricted)
  4. Carlos Gómez & Javier Lozano & Javier Rey-Maquieira, 2008. "Environmental policy and long-term welfare in a tourism economy," Spanish Economic Review, Springer, vol. 10(1), pages 41-62, March. [Downloadable!] (restricted)
  5. Guido Candela & Roberto Cellini, 2006. "Investment in Tourism Market: A Dynamic Model of Differentiated Oligopoly," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 35(1), pages 41-58, September. [Downloadable!] (restricted)
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  6. Schubert, Stefan Franz & Brida, Juan Gabriel, 2008. "The Dynamic Effects of Subsidizing the Tourism Sector," MPRA Paper 16755, University Library of Munich, Germany. [Downloadable!]
  7. Paolo Figini & Massimiliano Castellani & Laura Vici, 2007. "Estimating Tourist Externalities on Residents: A Choice Modeling Approach to the Case of Rimini," Working Papers 2007.76, Fondazione Eni Enrico Mattei. [Downloadable!]
  8. Hayashi, Fumio, 1982. "Tobin's Marginal q and Average q: A Neoclassical Interpretation," Econometrica, Econometric Society, vol. 50(1), pages 213-24, January. [Downloadable!] (restricted)
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This page was last updated on 2009-11-29.

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