Tourism Demand and Wages in a General Equilibrium Model of Production

Henry Thompson

Tourism Economics, 2016, vol. 22, issue 1, 81-91

Abstract: Rising foreign income increases tourism demand and wages if tourism is labour-intensive relative to capital. This paper adds a third factor of production, skilled labour or natural resources, to delve more deeply into the potential income redistribution in general equilibrium due to rising foreign income. In a small open economy producing tourism and an import competing good, the wage may fall in spite of the expanding tourism sector if capital is a technical complement with the third factor. A model including a traditional export is also examined, as is a specific factors version of the model. The possibility of a falling wage with expanding labour-intensive tourism relates to a number of policy issues in touristic countries.

Keywords: tourism demand; wages; skilled wages; general equilibrium model (search for similar items in EconPapers)
Date: 2016
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Persistent link: https://EconPapers.repec.org/RePEc:sae:toueco:v:22:y:2016:i:1:p:81-91

DOI: 10.5367/te.2014.0419

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