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Tourism, Dutch Disease and Welfare in an Open Dynamic Economy

Author

Listed:
  • Chi-Chur Chao

    (CUHK - The Chinese University of Hong Kong [Hong Kong])

  • Bharat R. Hazari
  • Jean-Pierre Laffargue

    (Développement et mondialisation - CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique)

  • Pasquale M Sgro

    (Deakin University [Burwood])

  • Eden S. H. Yu

    (CUHK - City University of Hong Kong [Hong Kong])

Abstract

This paper examines the effects of an expansion in tourism on capital accumulation, sectoral output and resident welfare in an open economy with an externality in the traded good sector. An expansion of tourism increases the relative price of the nontraded good, improves the tertiary terms of trade and hence yields a gain in revenue. However, this increase in the relative price of nontraded goods results in a lowering of the demand for capital used in the traded sector. The subsequent de-industrialization in the traded good sector may lower resident welfare. This result is supported by numerical simulations.

Suggested Citation

  • Chi-Chur Chao & Bharat R. Hazari & Jean-Pierre Laffargue & Pasquale M Sgro & Eden S. H. Yu, 2006. "Tourism, Dutch Disease and Welfare in an Open Dynamic Economy," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00645346, HAL.
    • Handle: RePEc:hal:cesptp:halshs-00645346
    DOI: 10.1111/j.1468-5876.2006.00400.x
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    Keywords

    Tourism; Capital accumulation;

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