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Tourism, Dutch Disease and Welfare in an Open Dynamic EconomyChi Chur ChaoChinese University of Hong Kong - Department of Economics Bharat R. HazariCity University of Hong Kong Jean-Pierre LaffargueCEPREMAP Pasquale M. SgroDeakin University - Deakin Business School Eden S. H. YuCity University of Hong Kong - Department of Economics & Finance Japanese Economic Review, Vol. 57, No. 4, pp. 501-515, December 2006 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.
Number of Pages in PDF File: 15 Accepted Paper SeriesDate posted: November 2, 2006Suggested CitationContact Information
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