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Tourism, jobs, capital accumulation and the economy: A dynamic analysis


  • Chi-Chur Chao

    (Department of Economics - Chinese University of Hong Kong - The Chinese University of Hong Kong [Hong Kong], Deakin Business School - Deakin University)

  • Bharat R. Hazari

    (Deakin Business School - Deakin University)

  • Jean-Pierre Laffargue

    (PJSE - Paris-Jourdan Sciences Economiques - ENS Paris - École normale supérieure - Paris - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique, CEPREMAP - Centre pour la recherche économique et ses applications, UP1 - Université Panthéon-Sorbonne)

  • Pasquale M. Sgro

    (Deakin Business School - Deakin University)

  • Eden S. H. Yu

    (Department of Economics and Finance - City University of Hong Kong - CUHK - City University of Hong Kong [Hong Kong])


This paper examines the effects of tourism on labor employment, capital accumulation and resident welfare for a small open economy with unemployment. A tourism boom improves the terms of trade, increases labor employment, but lowers capital accumulation. The reduction in the capital stock depends on the degree of factor intensity. When the traded sector is weakly capital intensive, the fall in capital would not be so severe and the expansion of tourism improves welfare. However, when the traded sector is strongly capital intensive, the fall in capital can be a dominant factor to lower welfare. This immiserizing result of tourism on resident welfare is confirmed by the German data.

Suggested Citation

  • Chi-Chur Chao & Bharat R. Hazari & Jean-Pierre Laffargue & Pasquale M. Sgro & Eden S. H. Yu, 2005. "Tourism, jobs, capital accumulation and the economy: A dynamic analysis," PSE Working Papers halshs-00590811, HAL.
  • Handle: RePEc:hal:psewpa:halshs-00590811
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    References listed on IDEAS

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    Cited by:

    1. Schubert, Stefan Franz & Brida, Juan Gabriel, 2008. "The Dynamic Effects of Subsidizing the Tourism Sector," MPRA Paper 16755, University Library of Munich, Germany.
    2. Chi-Chur Chao & Pasquale M. Sgro, 2008. "Environmental Control, Wage Inequality and National Welfare for a Tourism Economy," Working Papers 78, Sapienza University of Rome, CIDEI.
    3. Schubert, Stefan Franz & Brida, Juan Gabriel, 2009. "A Dynamic Model of Economic Growth in a Small Tourism Driven Economy," MPRA Paper 16737, University Library of Munich, Germany.
    4. Cristina Santos & Alexandre Almeida & Aurora A.C. Teixeira, 2008. "Searching for clusters in tourism. A quantitative methodological proposal," FEP Working Papers 293, Universidade do Porto, Faculdade de Economia do Porto.
    5. Schubert, Stefan Franz, 2009. "Coping with Externalities in Tourism - A Dynamic Optimal Taxation Approach," MPRA Paper 16736, University Library of Munich, Germany.
    6. Juan Gabriel Brida & Silvia London & Mara Rojas, 2013. "A Dynamic Model of Tourism and Economic Growth: the Role of Physical and Human Capital," Economics Bulletin, AccessEcon, vol. 33(2), pages 1361-1373.

    More about this item


    tourism; employment; capital accumulation; welfare;

    JEL classification:

    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General
    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade


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