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A Dynamic Model of Tourism and Economic Growth: the Role of Physical and Human Capital

  • Juan Gabriel Brida

    ()

    (Free University of Bolzano)

  • Silvia London

    ()

    (Universidad Nacional del Sur)

  • Mara Rojas

    ()

    (Universidad Nacional del Sur)

This paper study the relationships between tourism and economic growth by introducing a dynamic model whose ingredients are an economy producing a non-traded consumption good consumed by domestic residents and foreign tourists and a capital good. The model analyses the relationships between tourism growth, physical and human capital accumulation and changes in the terms of trade. From this analysis, several interesting results are obtained that depend on initial conditions of the main variables and on variations in terms of trade.. First, it is shown that tourism allows local population to enjoy a given welfare level with a lower saving rate than they would have in a closed economic system. Second, it is revealed that along the balanced growth path, the rate of human capital accumulation in the tourism industry acts negatively on the rate of change in the terms of trade. A more productive industry becomes more cheaper and cheaper for the rest of the world and for the residents themselves. Third, it is shown that when prices steadily increase, the model implies an unbalanced relationship between domestic and tourism demands. In that case, the economy could assign all production to internal consumption, vanishing the tourism industry; or, by the contrary, it could specialize completely in tourism, exporting all production of domestic consumption goods and importing all consumption goods for domestic demand.

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Article provided by AccessEcon in its journal Economics Bulletin.

Volume (Year): 33 (2013)
Issue (Month): 2 ()
Pages: 1361-1373

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Handle: RePEc:ebl:ecbull:eb-13-00030
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  1. Chou, Yuan K., 2006. "Three simple models of social capital and economic growth," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 35(5), pages 889-912, October.
  2. Chi-Chur Chao & Bharat R. Hazari & Jean-Pierre Laffargue & Pasquale M. Sgro & Eden S. H. Yu, 2005. "Tourism, jobs, capital accumulation and the economy: A dynamic analysis," PSE Working Papers halshs-00590811, HAL.
  3. Edgar J Sanchez Carrera & W. Adrian Risso & Juan Gabriel Brida, 2008. "Tourism's Impact on Long-Run Mexican Economic Growth," Economics Bulletin, AccessEcon, vol. 3(21), pages 1-8.
  4. Yuan K. Chou, 2002. "Modelling Social Capital And Growth," Department of Economics - Working Papers Series 865, The University of Melbourne.
  5. Jordan Shan & Ken Wilson, 2001. "Causality between trade and tourism: empirical evidence from China," Applied Economics Letters, Taylor & Francis Journals, vol. 8(4), pages 279-283.
  6. Jacint Balaguer & Manuel Cantavella-Jorda, 2002. "Tourism as a long-run economic growth factor: the Spanish case," Applied Economics, Taylor & Francis Journals, vol. 34(7), pages 877-884.
  7. Hazari, Bharat R. & Kaur, Charanjit, 1995. "Tourism and welfare in the presence of pure monopoly in the non-traded goods sector," International Review of Economics & Finance, Elsevier, vol. 4(2), pages 171-177.
  8. A. Lanza & F. Pigliaru, 1999. "Why Are Tourism Countries Small and Fast-Growing?," Working Paper CRENoS 199906, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia.
  9. Schubert, Stefan Franz & Brida, Juan Gabriel, 2008. "The Dynamic Effects of Subsidizing the Tourism Sector," MPRA Paper 16755, University Library of Munich, Germany.
  10. Hazari, Bharat R. & A-Ng, 1993. "An analysis of tourists' consumption of non-traded goods and services on the welfare of the domestic consumers," International Review of Economics & Finance, Elsevier, vol. 2(1), pages 43-58.
  11. Brida, Juan Gabriel & Pereyra, Juan Sebastián & Such, María Jesús & Pulina, Manuela, 2011. "Causalidad entre turismo y crecimiento económico de largo plazo: una revisión crítica de la literatura econométrica
    [Causality between tourism and long-term economic growth: a critical review of th
    ," MPRA Paper 37332, University Library of Munich, Germany, revised 2011.
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