Environmental regulations for a small open economy with tourism

Jean-Pierre Laffargue (), Chi-Chur Chao, Bharat Hazari and Eden Yu
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Jean-Pierre Laffargue: CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement

Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) from HAL

Abstract: This chapter shows that in the presence of tourism, the traditional policy prescription, free trade in goods and the standard Pigouvian tax on pollution, is not optimal for a small open economy. Foreign tourists consume mainly local non-traded goods in the tourist-receiving economy. Inbound tourism converts formally non-traded goods into tradables, generating a tourism terms-of-trade effect. Owing to this favourable effect ,positive tariffs and stricter pollution taxes can actually improve welfare of domestic residents. The optimal rates of tariffs and pollution taxes are derived and explained for the economy with tourism. These positive rates are confirmed by simulations.

Keywords: Inbound tourism; Optimal tariffs; Optimal pollution taxes (search for similar items in EconPapers)
Date: 2008
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Published in Binh Tran-Nam, Ngo Van Long & Makoto Tawada. Globalization and Emerging Issues in Trade Theory and Policy, Emerald, pp.269-284, 2008, Frontiers of Economics and Globalization

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Working Paper: Environmental regulations for a small open economy with tourism (2008)
Working Paper: Environmental regulations for a small open economy with tourism (2008)
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