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Explaining High Economic Growth in Small Tourism Countries with a Dynamic General Equilibrium Model
Álvarez-Albelo, Carmen D. (Universidad de La Laguna)
Hernández Martín, Raúl (Universidad de La Laguna)
Xarxa de Referència en Economia Aplicada (XREAP)

Publicació: Xarxa de Referència en Economia Aplicada (XREAP) 2007
Descripció: 44 p.
Resum: This paper shows that tourism specialisation can help to explain the observed high growth rates of small countries. For this purpose, two models of growth and trade are constructed to represent the trade relations between two countries. One of the countries is large, rich, has an own source of sustained growth and produces a tradable capital good. The other is a small poor economy, which does not have an own engine of growth and produces tradable tourism services. The poor country exports tourism services to and imports capital goods from the rich economy. In one model tourism is a luxury good, while in the other the expenditure elasticity of tourism imports is unitary. Two main results are obtained. In the long run, the tourism country overcomes decreasing returns and permanently grows because its terms of trade continuously improve. Since the tourism sector is relatively less productive than the capital good sector, tourism services become relatively scarcer and hence more expensive than the capital good. Moreover, along the transition the growth rate of the tourism economy holds well above the one of the rich country for a long time. The growth rate differential between countries is particularly high when tourism is a luxury good. In this case, there is a faster increase in the tourism demand. As a result, investment of the small economy is boosted and its terms of trade highly improve.
Drets: Aquest document està subjecte a una llicència d'ús de Creative Commons, amb la qual es permet copiar, distribuir i comunicar públicament l'obra sempre que se'n citin l'autor original, la universitat i la xarxa i no se'n faci cap ús comercial ni obra derivada, tal com queda estipulat en la llicència d'ús Creative Commons
Llengua: Anglès.
Col·lecció: Documents de treball de la Xarxa de Referència en Economia Aplicada (XREAP)
Col·lecció: XREAP ; 2007-06
Document: workingPaper
Matèria: High growth ; Small tourism countries ; Terms of trade ; Luxury good ; Dynamic general equilibrium ; Turisme ; Creixement econòmic ; Comerç internacional

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44 p, 746.2 KB

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