The Economics of Small Island Tourism

The Economics of Small Island Tourism

International Demand and Country Risk Analysis

The Fondazione Eni Enrico Mattei series on Economics, the Environment and Sustainable Development

Riaz Shareef, Suheija Hoti and Michael McAleer

This study forms an entirely new area of research on Small Island Tourism Economies (SITEs). It addresses the importance of uncertainty in monthly international tourist arrivals and country risk indicators to the macroeconomy.

Chapter 2: Salient Features of Small Island Tourism Economies

Riaz Shareef, Suheija Hoti and Michael McAleer

Subjects: development studies, tourism, economics and finance, environmental economics, environment, environmental economics, tourism, geography, tourism


1 2.1 INTRODUCTION Empirical analysis in tourism demand has typically been based on the consumer theory of demand, one of the foundations of microeconomics. Supply and demand of international tourism as a good or service can be viewed as international trade, and the consumption of international tourism requires the crossing of borders. However, application of international trade theory to analyse international tourism demand may not be feasible because most international trade theories are based on relative factor endowments. In international tourism demand analysis, it is not possible to compute factor endowments. However, it is possible to measure the worth of a tourist attraction by counting the number of people who visit, or money spent while visiting, an attraction. The theoretical elegance is obscured when the worth of a tourist attraction in a cross sectional setting is to be analysed. Hence, it is conceivable to place tourist attractions or destinations with similar attributes in an analytical framework. Small Island Tourism Economies (SITEs) are an example of a tourist destination. This chapter evaluates the common characteristics which impinge on SITEs and the implications of sustainable economic prosperity. These economies are relatively small in size and have small populations. They are all islands surrounded by very delicate ecosystems, and have an overwhelming reliance on international tourism for economic development. In analysing the common attributes of these economies, the main attributes which form the acronym SITE are examined in detail. Moreover, their geographical location, economic features, social indicators, political attributes, vulnerability and numerous other...

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