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

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  • Wattanakuljarus, Anan
  • Coxhead, Ian

Abstract

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.

Suggested Citation

  • 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.
  • 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.
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    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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    Cited by:

    1. Chi-Chur Chao & Jean-Pierre Laffargue & Pasquale M. Sgro, 2010. "Foreign Aid, Wage Inequality, and Welfare for a Small Open Economy with Tourism," Review of International Economics, Wiley Blackwell, vol. 18(3), pages 454-464, August.
    2. repec:eee:touman:v:32:y:2011:i:5:p:1223-1228 is not listed on IDEAS
    3. repec:eee:touman:v:60:y:2017:i:c:p:177-187 is not listed on IDEAS
    4. Gavrel, Frédéric & Lebon, Isabelle & Rebière, Thérèse, 2010. "Layoff taxes and minimum wage: Two complementary public policies," Economics Letters, Elsevier, vol. 107(1), pages 30-32, April.
    5. Sofyan SYAHNUR, "undated". "The Analysis of the Impact of Oil Prices Shock on the Poor Relied on the Existing Distribution of Income Pattern," EcoMod2010 259600162, EcoMod.
    6. Shi, Hui, 2012. "The efficiency of government promotion of inbound tourism: The case of Australia," Economic Modelling, Elsevier, vol. 29(6), pages 2711-2718.
    7. Ponjan, Pathomdanai & Thirawat, Nipawan, 2016. "Impacts of Thailand’s tourism tax cut: A CGE analysis," Annals of Tourism Research, Elsevier, vol. 61(C), pages 45-62.
    8. repec:eee:touman:v:48:y:2015:i:c:p:11-20 is not listed on IDEAS
    9. Li, ShiNa & Blake, Adam & Thomas, Rhodri, 2013. "Modelling the economic impact of sports events: The case of the Beijing Olympics," Economic Modelling, Elsevier, vol. 30(C), pages 235-244.
    10. Petit, Sylvain, 2016. "International trade in services and inequalities: Empirical evaluation and role of tourism services," MPRA Paper 75206, University Library of Munich, Germany.
    11. Zibanai ZHOU, 2013. "A Peep into Tourism Development in Zimbabwe: 1980-2010," Asian Journal of Empirical Research, Asian Economic and Social Society, vol. 3(7), pages 884-894, July.
    12. repec:eee:touman:v:62:y:2017:i:c:p:253-263 is not listed on IDEAS
    13. repec:eee:touman:v:34:y:2013:i:c:p:25-36 is not listed on IDEAS
    14. Mohamed KARIM & Eric Tchouamou NJOYA, 2013. "Impact of Inbound Tourism in Kenyan Economy: An Analysis Using a Computable General Equilibrium Model," Asian Journal of Empirical Research, Asian Economic and Social Society, vol. 3(7), pages 911-932, July.
    15. Wianwiwat, S. & Asafu-Adjaye, J., 2011. "Modelling the promotion of biomass use: A case study of Thailand," Energy, Elsevier, vol. 36(3), pages 1735-1748.
    16. Inchausti-Sintes, Federico, 2015. "Tourism: Economic growth, employment and Dutch Disease," Annals of Tourism Research, Elsevier, vol. 54(C), pages 172-189.
    17. Wianwiwat, Suthin & Asafu-Adjaye, John, 2013. "Is there a role for biofuels in promoting energy self sufficiency and security? A CGE analysis of biofuel policy in Thailand," Energy Policy, Elsevier, vol. 55(C), pages 543-555.

    More about this item

    Keywords

    Tourism Thailand General equilibrium Income distribution;

    JEL classification:

    • D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models

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