Tourism and Growth in the Local Labor Market

This paper examines how the local labor market (LLM) responds to shifts in touristic attractiveness. We assemble and combine several largely underutilized data sources, and construct a shift-share research design that exploits a classification of Italian localities by their dominant touristic assets and aggregate trends in foreign tourists' choices. Across all LLMs, we find a positive relationship between changes in attractiveness and changes in the local tourism-related economic activity, with a positive impact on tourism expenditure and tourism employment, but no effect on total employment. However, in LLMs with high baseline unemployment, we document sizable positive effects on total employment, driven both by expansions in industries related to tourism and by spillovers to firms in the nontradable and manufacturing sector. A simple spatial equilibrium model with heterogeneous LLMs helps interpret these responses and clarifies the mechanisms behind the observed patters.