IDEAS home Printed from https://ideas.repec.org/a/eee/ecmode/v29y2012i6p2711-2718.html
   My bibliography  Save this article

The efficiency of government promotion of inbound tourism: The case of Australia

Author

Listed:
  • Shi, Hui

Abstract

This paper examines the effect of tax-funded promotion of inbound tourism on domestic welfare in an open economy setting with increasing returns in the tourism industry. As inbound tourism is a way of extending the market and getting more demand to realize the implication of increasing returns, promotion can help overcome the underproduction of tourism goods. However, taxation leads to a decline in domestic residents' consumption of tourism and non-tourism goods and reduces the competitiveness of the non-tourism industry in the host country. An important result obtained is that government promotion of inbound tourism will not improve welfare unless the degree of increasing returns in the tourism industry is high enough and the national income of the foreign country multiplied by the parameter of marketing effectiveness is larger than the national income of the home country. This finding is supported by a simulation with the case of Australia.

Suggested Citation

  • Shi, Hui, 2012. "The efficiency of government promotion of inbound tourism: The case of Australia," Economic Modelling, Elsevier, vol. 29(6), pages 2711-2718.
  • Handle: RePEc:eee:ecmode:v:29:y:2012:i:6:p:2711-2718
    DOI: 10.1016/j.econmod.2012.06.019
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0264999312001927
    Download Restriction: Full text for ScienceDirect subscribers only

    File URL: https://libkey.io/10.1016/j.econmod.2012.06.019?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Chi‐Chur Chao & Bharat R. Hazari & Jean‐Pierre Laffargue & Pasquale M. Sgro & Eden S. H. Yu, 2006. "Tourism, Dutch Disease And Welfare In An Open Dynamic Economy," The Japanese Economic Review, Japanese Economic Association, vol. 57(4), pages 501-515, December.
    2. Chi‐Chur Chao & Bharat R. Hazari & Jean‐Pierre Laffargue & Pasquale M. Sgro & Eden S. H. Yu, 2006. "Tourism, Dutch Disease And Welfare In An Open Dynamic Economy," The Japanese Economic Review, Japanese Economic Association, vol. 57(4), pages 501-515, December.
    3. repec:bla:econom:v:58:y:1991:i:232:p:515-29 is not listed on IDEAS
    4. Dwyer, L. & Forsyth, P., 1992. "The Case for Tourism Promotion: an Economic Analysis," CEPR Discussion Papers 265, Centre for Economic Policy Research, Research School of Economics, Australian National University.
    5. Werner Antweiler & Daniel Trefler, 2002. "Increasing Returns and All That: A View from Trade," American Economic Review, American Economic Association, vol. 92(1), pages 93-119, March.
    6. Dingsheng Zhang & Yew-Kwang Ng, 2004. "Average-cost Pricing, Increasing Returns, and Optimal Output in a Model With Home and Market Production," Econometric Society 2004 Australasian Meetings 322, Econometric Society.
    7. Yew-Kwang Ng, 2009. "Average-Cost Pricing, Increasing Returns, and Optimal Output: Comparing Home and Market Production," Palgrave Macmillan Books, in: Increasing Returns and Economic Efficiency, chapter 9, pages 101-121, Palgrave Macmillan.
    8. Haiwen Zhou, 2007. "Increasing Returns, the Choice of Technology, and the Gains from Trade," Southern Economic Journal, John Wiley & Sons, vol. 74(2), pages 581-600, October.
    9. repec:bla:pacecr:v:8:y:2003:i:3:p:279-287 is not listed on IDEAS
    10. Sarath Divisekera & Nada Kulendran, 2006. "Economic Effects of Advertising on Tourism Demand: A Case Study," Tourism Economics, , vol. 12(2), pages 187-205, June.
    11. Salih Turan Katircioğlu, 2010. "International Tourism, Higher Education and Economic Growth: The Case of North Cyprus," The World Economy, Wiley Blackwell, vol. 33(12), pages 1955-1972, December.
    12. Ng, Yew-Kwang, 1984. "Quasi-Pareto Social Improvements," American Economic Review, American Economic Association, vol. 74(5), pages 1033-1050, December.
    13. Dixit, Avinash K & Stiglitz, Joseph E, 1977. "Monopolistic Competition and Optimum Product Diversity," American Economic Review, American Economic Association, vol. 67(3), pages 297-308, June.
    14. 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.
    15. repec:bla:econom:v:72:y:2005:i:285:p:151-169 is not listed on IDEAS
    16. Geoffrey Heal, 1980. "Spatial Structure in the Retail Trade: A Study in Product Differentiation with Increasing Returns," Bell Journal of Economics, The RAND Corporation, vol. 11(2), pages 565-583, Autumn.
    17. Junko Doi & Koichi Futagami, 2004. "Commodity Taxation and the Effects of Entry: A Case of Variety Preferences," Journal of Economics, Springer, vol. 83(3), pages 267-279, December.
    18. Wattanakuljarus, Anan & Coxhead, Ian, 2008. "Is tourism-based development good for the poor?: A general equilibrium analysis for Thailand," Journal of Policy Modeling, Elsevier, vol. 30(6), pages 929-955.
    19. Krugman, Paul R., 1979. "Increasing returns, monopolistic competition, and international trade," Journal of International Economics, Elsevier, vol. 9(4), pages 469-479, November.
    20. Grinols, Earl L, 1991. "Increasing Returns and the Gains from Trade," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 32(4), pages 973-984, November.
    21. Devereux, Michael B & Head, Allen C & Lapham, Beverly J, 1996. "Monopolistic Competition, Increasing Returns, and the Effects of Government Spending," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 28(2), pages 233-254, May.
    22. Brian R. Copeland, 2012. "Tourism And Welfare-Enhancing Export Subsidies," The Japanese Economic Review, Japanese Economic Association, vol. 63(2), pages 232-243, June.
    23. Dao‐Zhi Zeng & Xiwei Zhu, 2011. "Tourism And Industrial Agglomeration," The Japanese Economic Review, Japanese Economic Association, vol. 62(4), pages 537-561, December.
    24. Yang, Xiaokai & Heijdra, Ben J, 1993. "Monopolistic Competition and Optimum Product Diversity: Comment," American Economic Review, American Economic Association, vol. 83(1), pages 295-301, March.
    25. Myles, G. D., 1987. "Tax design in the presence of imperfect competition : An example," Journal of Public Economics, Elsevier, vol. 34(3), pages 367-378, December.
    26. Horstmann, Ignatius J. & Markusen, James R., 1986. "Up the average cost curve: Inefficient entry and the new protectionism," Journal of International Economics, Elsevier, vol. 20(3-4), pages 225-247, May.
    27. Helpman, Elhanan, 1981. "International trade in the presence of product differentiation, economies of scale and monopolistic competition : A Chamberlin-Heckscher-Ohlin approach," Journal of International Economics, Elsevier, vol. 11(3), pages 305-340, August.
    28. repec:bla:pacecr:v:8:y:2003:i:3:p:245-258 is not listed on IDEAS
    29. Ethier, Wilfred J, 1982. "National and International Returns to Scale in the Modern Theory of International Trade," American Economic Review, American Economic Association, vol. 72(3), pages 389-405, June.
    30. Juin‐Jen Chang & Lee‐Jung Lu & Shih‐Wen Hu, 2011. "Congestion Externalities of Tourism, Dutch Disease and Optimal Taxation: Macroeconomic Implications," The Economic Record, The Economic Society of Australia, vol. 87(276), pages 90-108, March.
    31. Haiwen Zhou, 2007. "Increasing Returns, the Choice of Technology, and the Gains from Trade," Southern Economic Journal, John Wiley & Sons, vol. 74(2), pages 581-600, October.
    32. Eaton, Jonathan & Panagariya, Arvind, 1979. "Gains from trade under variable returns to scale, commodity taxation, tariffs and factor market distortions," Journal of International Economics, Elsevier, vol. 9(4), pages 481-501, November.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Adachi, Yusuke, 2018. "Applicability of agglomeration to tourism economics," Japan and the World Economy, Elsevier, vol. 47(C), pages 58-67.
    2. Agiomirgianakis, George & Serenis, Dimitrios & Tsounis, Nicholas, 2017. "Effective timing of tourism policy: The case of Singapore," Economic Modelling, Elsevier, vol. 60(C), pages 29-38.
    3. Caiwei Ma & Norman Au & Lianping Ren, 0. "Biased minds experience improved decision-making speed and confidence on social media: a heuristic approach," Information Technology & Tourism, Springer, vol. 0, pages 1-32.
    4. Heping Huang & Wei Zhong & Qingsheng Lai & Yishu Qiu & Hong Jiang, 2020. "The Spatial Distribution, Influencing Factors, and Development Path of Inbound Tourism in China—An Empirical Analysis of Market Segments Based on Travel Motivation," Sustainability, MDPI, vol. 12(6), pages 1-15, March.
    5. Caiwei Ma & Norman Au & Lianping Ren, 2020. "Biased minds experience improved decision-making speed and confidence on social media: a heuristic approach," Information Technology & Tourism, Springer, vol. 22(4), pages 593-624, December.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. J. Peter Neary, 2000. "Monopolistic Competition and International Trade Theory," Working Papers 200025, School of Economics, University College Dublin.
    2. Adachi, Yusuke, 2018. "Applicability of agglomeration to tourism economics," Japan and the World Economy, Elsevier, vol. 47(C), pages 58-67.
    3. Paolo Epifani & Gino Gancia, 2008. "The Skill Bias of World Trade," Economic Journal, Royal Economic Society, vol. 118(530), pages 927-960, July.
    4. Behrens, Kristian & Murata, Yasusada, 2012. "Trade, competition, and efficiency," Journal of International Economics, Elsevier, vol. 87(1), pages 1-17.
    5. Juan Gabriel Brida & Silvia London & Mara Rojas, 2013. "A Dynamic Model of Tourism and Economic Growth: the Role of Physical and Human Capital," Economics Bulletin, AccessEcon, vol. 33(2), pages 1361-1373.
    6. repec:jes:wpaper:y:2012:v:4:p:736-746 is not listed on IDEAS
    7. Liviu-George Maha & Andreea-Nicoleta Donici & Andreea Maha, 2012. "Limits And Difficulties In Implementing The Strategic Trade Policy," CES Working Papers, Centre for European Studies, Alexandru Ioan Cuza University, vol. 4(4), pages 736-746, December.
    8. Heiland, Inga & Kohler, Wilhelm, 2022. "Heterogeneous workers, trade, and migration," European Economic Review, Elsevier, vol. 144(C).
    9. James R. Markusen & Anthony J. Venables, 2021. "The theory of endowment, intra-industry and multi-national trade," World Scientific Book Chapters, in: BROADENING TRADE THEORY Incorporating Market Realities into Traditional Models, chapter 4, pages 69-94, World Scientific Publishing Co. Pte. Ltd..
    10. Krugman, Paul R., 1989. "Industrial organization and international trade," Handbook of Industrial Organization, in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 2, chapter 20, pages 1179-1223, Elsevier.
    11. Biswas, Rajit, 2014. "Metzler paradox and home market effects in presence of internationally mobile capital and non-traded goods," MPRA Paper 56335, University Library of Munich, Germany.
    12. Ai‐Ting Goh & Tomasz K. Michalski, 2012. "Quality Assurance and the Home Market Effect," Review of International Economics, Wiley Blackwell, vol. 20(2), pages 237-255, May.
    13. Markusen, James R. & Melvin, James R. & Maskus, Keith E. & Kaempfer, William, 1995. "International trade: theory and evidence," MPRA Paper 21989, University Library of Munich, Germany.
    14. Hazel Parcon, 2008. "Disaggregating PTAs at the Role of International Division of Labor on PTA Formation," Working Papers 200806, University of Hawaii at Manoa, Department of Economics.
    15. Bel Hadj Tarek, 2012. "Product Differentiation and Intra-Industrial Trade: Quantitative Assessment in the Case of Tunisia," Journal of Economics and Behavioral Studies, AMH International, vol. 4(10), pages 570-587.
    16. Joseph F. Francois & Douglas Nelson, 2002. "A Geometry Of Specialisation," Economic Journal, Royal Economic Society, vol. 112(481), pages 649-678, July.
    17. Stauvermann, Peter Josef & Kumar, Ronald Ravinesh, 2016. "Economics of tourism & growth for small island countries," Tourism Management, Elsevier, vol. 55(C), pages 272-275.
    18. Francisco L. Rivera-Batiz & Luis A. Rivera-Batiz, 2018. "Economic Integration and Endogenous Growth," World Scientific Book Chapters, in: Francisco L Rivera-Batiz & Luis A Rivera-Batiz (ed.), International Trade, Capital Flows and Economic Development, chapter 1, pages 3-32, World Scientific Publishing Co. Pte. Ltd..
    19. Sugata Marjit & Biswajit Mandal, 2021. "Monopolistic Competition, Optimum Product Diversity, and International Trade - The Role of Factor Endowment and Factor Intensities," CESifo Working Paper Series 9256, CESifo.
    20. Werner Antweiler & Daniel Trefler, 2002. "Increasing Returns and All That: A View from Trade," American Economic Review, American Economic Association, vol. 92(1), pages 93-119, March.
    21. Francisco L. Rivera-Batiz & Luis A. Rivera-Batiz, 2018. "International Trade with Endogenous Technological Change," World Scientific Book Chapters, in: Francisco L Rivera-Batiz & Luis A Rivera-Batiz (ed.), International Trade, Capital Flows and Economic Development, chapter 2, pages 33-70, World Scientific Publishing Co. Pte. Ltd..

    More about this item

    Keywords

    Promotion; Inbound tourism; Increasing returns; Welfare;
    All these keywords.

    JEL classification:

    • D50 - Microeconomics - - General Equilibrium and Disequilibrium - - - General
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:ecmode:v:29:y:2012:i:6:p:2711-2718. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/inca/30411 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.