Growth, Conventional Production and Tourism Specialisation: Technological Catching-up Versus Terms-of-Trade Effects

Simone Valente

No 12139, Natural Resources Management Working Papers from Fondazione Eni Enrico Mattei (FEEM)

Abstract: This paper extends the 'expanding-varieties' growth model in a two-countries-two-goods setup, and describes the dynamics of growth rates and terms of trade when the industry-based economy is the innovation leader, while the tourism-based economy is the follower (i.e. increases the number of intermediate inputs by readapting innovations developed abroad). Two types of transitional dynamics may exist: technological catching-up and technological falling-behind. Contrary to the standard result, technological catching-up by the follower is associated with lower growth rates with respect to the leader, whereas terms-of-trade effects guarantee positive growth differentials for the tourism-based economy when the technological gap with the leader increases over time. The underlying principle of 'increased relative demand' might explain the good economic performance observed in tourism-dependent economies.

Keywords: Resource/Energy; Economics; and; Policy (search for similar items in EconPapers)
Pages: 32
Date: 2005
References: View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Working Paper: Growth, Conventional Production and Tourism Specialisation: Technological Catching-up Versus Terms-of-Trade Effects (2005)
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Persistent link: https://EconPapers.repec.org/RePEc:ags:feemnr:12139

DOI: 10.22004/ag.econ.12139

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