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Tax Incentives and Job Creation in the Tourism Industry of Brazil

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  • Grégoire Garsous
  • David Corderi
  • Mercedes Velasco
  • Andrea Colombo

Abstract

In recent decades, a significant number of developing countries have implemented fiscal incentives programs for the tourism industry as part of their regional development policies. The main objective of these programs is to increase local investment and employment, as tourism activities are labor intensive. However, little evidence is available to assess the effect of these policies on job creation in emerging markets. In this paper, we analyze a program of fiscal incentives introduced by the Brazilian federal government in the SUDENE area in 2002 and in which tourism firms were eligible to participate. Through a difference-in-difference estimation, we compare before and after 2002 the change in the logarithm of local employment in the SUDENE municipalities (the treatment group) to the change in the same outcome in a group of municipalities that were not affected by the program (the control group). Our empirical analysis provides robust evidence that the fiscal incentives led to a substantial increase in tourism employment in the SUDENE region. In particular, we find that local employment in the tourism industry was on average 34 percent higher in the treatment group. This result does not seem to be affected by either displacement effect or job destruction in those neighboring municipalities that had not benefited from the same tax incentives.

Suggested Citation

  • Grégoire Garsous & David Corderi & Mercedes Velasco & Andrea Colombo, 2016. "Tax Incentives and Job Creation in the Tourism Industry of Brazil," Working Papers ECARES ECARES 2016-07, ULB -- Universite Libre de Bruxelles.
  • Handle: RePEc:eca:wpaper:2013/227978
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    References listed on IDEAS

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    Keywords

    employment; public economics; regional development; tax incentives; tourism;

    JEL classification:

    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
    • J20 - Labor and Demographic Economics - - Demand and Supply of Labor - - - General
    • L83 - Industrial Organization - - Industry Studies: Services - - - Sports; Gambling; Restaurants; Recreation; Tourism
    • R58 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Regional Development Planning and Policy

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