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Is tourism-based development good for the poor?: A general equilibrium analysis for Thailand

Listed author(s):
  • Wattanakuljarus, Anan
  • Coxhead, Ian

In low-income countries, the use of tax revenues to fund tourism promotions is motivated in part by the belief that tourism growth will improve income distribution by expanding demand for relatively low-skilled labor. We examine this belief for the case of Thailand, a highly tourism-intensive economy, using a new and specifically designed applied general equilibrium model. Thailand's tourism boom, fueled in part by a series of publicly funded promotional campaigns, has coincided with a period of worsening inequality. We find that growth of inbound tourism demand raises aggregate household income, but worsens its distribution. This is because tourism sectors are not especially labor-intensive in the Thai context, and because the expansion of foreign tourism demand creates general equilibrium effects that undermine profitability in tradable sectors (such as agriculture) from which the poor derive a substantial fraction of their income. These results indicate that tourism growth is not a panacea for other goals of development policy; to address inequality, additional policy instruments are required. We explore this implication with the example of a lump-sum tax imposed at different rates for rich and poor households. In addition, we examine the robustness of our main results with respect to alternative factor market assumptions relevant to the Thai economy.

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Article provided by Elsevier in its journal Journal of Policy Modeling.

Volume (Year): 30 (2008)
Issue (Month): 6 ()
Pages: 929-955

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Handle: RePEc:eee:jpolmo:v:30:y:2008:i:6:p:929-955
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  1. Jean-Jacques Nowak & Mondher Sahli & Pasquale M. Sgro, 2003. "Tourism, Trade And Domestic Welfare," Pacific Economic Review, Wiley Blackwell, vol. 8(3), pages 245-258, October.
  2. Benjamin, Nancy C. & Devarajan, Shantayanan & Weiner, Robert J., 1989. "The Dutch disease in a developing country : Oil reserves in Cameroon," Journal of Development Economics, Elsevier, vol. 30(1), pages 71-92, January.
  3. Copeland, Brian R, 1991. "Tourism, Welfare and De-industrialization in a Small Open Economy," Economica, London School of Economics and Political Science, vol. 58(232), pages 515-529, November.
  4. Corden, W M, 1984. "Booming Sector and Dutch Disease Economics: Survey and Consolidation," Oxford Economic Papers, Oxford University Press, vol. 36(3), pages 359-380, November.
  5. Löfgren, Hans & Harris, Rebecca Lee & Robinson, Sherman, 2001. "A standard computable general equilibrium (CGE) model in GAMS," TMD discussion papers 75, International Food Policy Research Institute (IFPRI).
  6. Ramos Mabugu, 2002. "Short-term effects of policy reform on tourism and the macroeconomy in Zimbabwe: Applied CGE analysis," Development Southern Africa, Taylor & Francis Journals, vol. 19(3), pages 419-430.
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