Tourism, Dutch Disease and Welfare in an Open Dynamic Economy
Chi Chur Chao
Chinese University of Hong Kong - Department of Economics
Bharat R. Hazari
City University of Hong Kong
Pasquale M. Sgro
Deakin University - Deakin Business School
Eden S. H. Yu
City University of Hong Kong - Department of Economics & Finance
Japanese Economic Review, Vol. 57, No. 4, pp. 501-515, December 2006
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.
Number of Pages in PDF File: 15Accepted Paper Series
Date posted: November 2, 2006
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