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Tourism Specialization and Sustainability: A Long-Run Policy Analysis

Author

Listed:
  • Fabio Cerina

    (CRENoS and University of Cagliari)

Abstract

This study focuses on the dynamic evolution of a small open economy specialized in tourism based on natural resources when tourist services are supplied to foreign tourists who are crowding-averse and give positive value to the environmental quality. We analyse the steady-state properties and run several policy exercises in two versions of our model: in the first, private agents’ income is spent entirely on consumption while, in the second, agents are allowed to invest part of their income in pollution abatement technology (PAT) which artificially increases the rate of regeneration of the environmental asset. A unique locally saddle point equilibrium is found in both versions and for both the market and the centralized solution. Our main findings are that: 1) a corrective income tax raises steady state utility in both versions but is capable of leading the economy in its first-best dynamic path only when agents cannot invest in the PAT; 2) when the PAT is available to the government but not to agents, an income tax which finances abatement expenditures may increase steady state utility with respect to the market solution when the natural regeneration rate of the environment and the degree of crowding-aversion are both low enough; 3) when PAT is available, the market chooses to devote a higher fraction of income to abatement than the central planner but in both cases this fraction is positive only if the natural rate of regeneration is not too large; 4) when PAT is available an income pollution tax does not affect the dynamic path of the market economy.

Suggested Citation

  • Fabio Cerina, 2006. "Tourism Specialization and Sustainability: A Long-Run Policy Analysis," Working Papers 2006.11, Fondazione Eni Enrico Mattei.
  • Handle: RePEc:fem:femwpa:2006.11
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    References listed on IDEAS

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    1. Guido Candela & Roberto Cellini, 2006. "Investment in Tourism Market: A Dynamic Model of Differentiated Oligopoly," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 35(1), pages 41-58, September.
    2. Becker, Robert A., 1982. "Intergenerational equity: The capital-environment trade-off," Journal of Environmental Economics and Management, Elsevier, vol. 9(2), pages 165-185, June.
    3. R. Brau & A. Lanza & F. Pigliaru, 2003. "How fast are tourism countries growing? The cross country evidence," Working Paper CRENoS 200309, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia.
    4. Brau, Rinaldo, 2008. "Demand-driven sustainable tourism? A choice modelling analysis," MPRA Paper 82773, University Library of Munich, Germany.
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    Cited by:

    1. Brau, Rinaldo, 2008. "Demand-driven sustainable tourism? A choice modelling analysis," MPRA Paper 82773, University Library of Munich, Germany.

    More about this item

    Keywords

    Tourism specialization; Sustainability; Environmental quality; Crowding; Pollution abatement;

    JEL classification:

    • L83 - Industrial Organization - - Industry Studies: Services - - - Sports; Gambling; Restaurants; Recreation; Tourism
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
    • Q26 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Recreational Aspects of Natural Resources
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth

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