The Fondazione Eni Enrico Mattei series on Economics, the Environment and Sustainable Development
Edited by Alessandro Lanza, Anil Markandya and Francesco Pigliaru
Chapter 4: Tourism, increasing returns and welfare
* Jean-Jacques Nowak, Mondher Sahli and Pasquale Sgro 1. INTRODUCTION Tourism has often been regarded as a major source of economic growth, and governments often invest in infrastructure to promote tourism and growth.1 Tourism supplements the foreign exchange earnings already derived from trade in commodities and sometimes ﬁnances the imports of the capital goods necessary for the growth of the manufacturing sector.2 Tourism has also been regarded as a mechanism for generating increased income and employment, both in the formal and informal sectors.3 Hazari and Ng (1993) have also highlighted important diﬀerences between trade in commodities and tourism.4 However, international tourism has also at times been considered an activity that imposes costs on the host country. Much attention in this context has been paid to inﬂationary and low multiplier eﬀects of tourism expansion,5 increased pollution, congestion and despoilation of fragile environments,6 intra-generational inequity aggravation7 and even to adverse sociocultural impacts.8 Less obvious but more important costs of tourism have often been neglected, such as the adverse impacts of a tourism boom on other sectors resulting from general equilibrium eﬀects. However, theoretical and empirical studies tell us that these eﬀects can be quite substantial and have to be taken into account when assessing the net beneﬁt of a tourism boom on an economy.9 The model used in this chapter captures the interdependence and interaction between tourism and the rest of the economy, in particular, agriculture and manufacturing. This is important in view of the...
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