Edited by Alessandro Lanza, Anil Markandya and Francesco Pigliaru
Chapter 1: An investigation on the growth performance of small tourism countries
1 Rinaldo Brau, Alessandro Lanza and Francesco Pigliaru 1. INTRODUCTION In a recent paper, Easterly and Kraay (2000) investigate whether or not being small represents an economic disadvantage for a country. Their ﬁnding is that smaller countries are not poorer than average, nor that they grow more slowly. Similar results are also provided by Armstrong and Read (1995) and Armstrong et al. (1998). Yet reasons for being pessimistic are not diﬃcult to ﬁnd, especially in literature on endogenous growth, where scale eﬀects often play a role in the determination of an economy’s growth rate (Grossman and Helpman, 1991; Aghion and Howitt, 1998). Likewise, countries which rely strongly on international tourism are suspected of being locked into a slow growth path. Again, endogenous growth theories tend to emphasize the virtues of high-tech sectors, whose potential for high long-run growth is regarded as more promising than that of non-high-tech service sectors such as tourism.2 In addition, countries in which tourism is the prominent sector are often very small. So expectations about their economic performance are not high, to say the least. Nevertheless, this pessimistic perspective is challenged by a growing stream of literature on small and island countries’ economic performance, where tourism is generally associated to higher than average income levels (e.g. Read, 2004 for a recent survey). In this chapter we assess the reliability of these diﬀerent views about the likely role of tourism as a growth engine by looking at the cross-country evidence. To this aim, we...
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