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Tourism and Economic Development: Evidence from Mexico's Coastline

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  • Cecile Gaubert

    (UC Berkeley)

Abstract

Tourism is one of the most visible and fastest growing facets of globalization in developing countries. Despite widespread policy interest, however, we currently have limited empirical evidence on the economic consequences of this channel of market integration. This paper combines a rich collection of Mexican microdata with a quantitative spatial equilibrium model of trade in goods and tourism services and a new empirical strategy to estimate the long-run economic consequences of tourism. We estimate a number of reduced form effects of tourism on local economic outcomes in today's cross-section of Mexican municipalities. We develop an instrumental variable strategy that exploits geological and oceanographic variation in beach quality along the Mexican coastline. To assess tourism's welfare implications, we use a spatial equilibrium model, and use the reduced form moments to inform its calibration for counterfactual analysis. We find that tourism causes large and significant increases in long run local economic activity. These effects are driven by sizable positive spillovers on traded goods production. In the aggregate, however, we find that these spillovers are largely offset by reductions in agglomeration economies among non-touristic regions, so that the national gains from tourism are mainly driven by a classical market integration effect.

Suggested Citation

  • Cecile Gaubert, 2016. "Tourism and Economic Development: Evidence from Mexico's Coastline," 2016 Meeting Papers 298, Society for Economic Dynamics.
  • Handle: RePEc:red:sed016:298
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    Cited by:

    1. Garsous, Grégoire & Corderi, David & Velasco, Mercedes & Colombo, Andrea, 2017. "Tax Incentives and Job Creation in the Tourism Sector of Brazil’s SUDENE Area," World Development, Elsevier, vol. 96(C), pages 87-101.
    2. Oladunjoye, Opeyemi Nathaniel & Areyemi, Victor Olaife, 2021. "Tourism, Globalization and Economic Growth in Nigeria," African Journal of Economic Review, African Journal of Economic Review, vol. 9(2), April.
    3. Douglas Gollin & Martina Kirchberger & David Lagakos, 2017. "In Search of a Spatial Equilibrium in the Developing World," NBER Working Papers 23916, National Bureau of Economic Research, Inc.
    4. Besley, Timothy & Fetzer, Thiemo & Mueller, Hannes, 2019. "Terror and Tourism: The Economic Consequences of Media Coverage," CAGE Online Working Paper Series 449, Competitive Advantage in the Global Economy (CAGE).
    5. Besley, Timothy & Fetzer, Thiemo & Mueller, Hannes, 2023. "How Big is the Media Multiplier? Evidence from Dyadic News Data," The Warwick Economics Research Paper Series (TWERPS) 1483, University of Warwick, Department of Economics.
    6. Rodrigo Adão & Costas Arkolakis & Federico Esposito, 2019. "General Equilibrium Effects in Space: Theory and Measurement," NBER Working Papers 25544, National Bureau of Economic Research, Inc.
    7. D’Onofrio, Alexandra & Minetti, Raoul & Murro, Pierluigi, 2019. "Banking development, socioeconomic structure and income inequality," Journal of Economic Behavior & Organization, Elsevier, vol. 157(C), pages 428-451.
    8. Rodrigo Ad'o & Costas Arkolakis & Federico Esp'sito, 2019. "Spatial Linkages, Global Shocks, and Local Labor Markets: Theory and Evidence," Cowles Foundation Discussion Papers 2163, Cowles Foundation for Research in Economics, Yale University.

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