TOURISM, WELFARE AND DEINDUSTRIALIZATION IN A SMALL OPEN-ECONOMY

Investigates the effects of an expansion of tourism on welfare, output and factor prices in the host country using a general equilibrium international trade model. In the absence of taxes, foreign ownership and distortions, an increase in foreign visitors will increase welfare only if the price of non-tradables increases. Factor mobility and foreign ownership tend to reduce the gains from tourism, while commodity taxes tend to increase them. Conditions under which an increase in tourism can lead to de-industrialization are also discussed. -Author