THE PRICE TAG OF TOURISM: DO SMALL OPEN ECONOMIES DEPENDENT ON TOURISM REVENUES EXPERIENCE HIGHER PRICES OF GOODS AND SERVICES?

Maruška Vizek and Marina Tkalec

No 301622, Proceedings of International Academic Conferences from International Institute of Social and Economic Sciences

Abstract: Although theoretical models describing the influence of tourism on welfare of the host economy suggest that increase in prices is a direct outcome of intensified tourism activity, so far this outcome has not been put to the empirical test. Therefore, we use panel data models on a data set covering EU new member states and candidate countries (Montenegro and Turkey) in order to investigate the relationship between tourism dependence and the price level. Along with modeling the overall price level, we also separately model the price level of consumer goods, price level of consumer services, and price level of goods and services associated with tourism consumption (hotels and restaurants, recreation and culture, transportation, and food and beverages). Thereby, we control for other factors that commonly influence the price level of an economy, such as income, productivity, trade openness, money and fiscal dominance. Our results suggest that a dominant tourism sector increases the overall price level in the economy. This effect is however much stronger for prices of consumer services, in particular for prices of recreation and culture and hotel and restaurants.

Keywords: price level; tourism activity; panel data models; small open economies; European Union. (search for similar items in EconPapers)
JEL-codes: C33 E31 L83 (search for similar items in EconPapers)
Pages: 16 pages
Date: 2014-07
New Economics Papers: this item is included in nep-cwa, nep-mac and nep-tur
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Published in Proceedings of the Proceedings of the 11th International Academic Conference, Reykjavik, Jul 2014, pages 413-428

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https://iises.net/proceedings/11th-international-a ... id=3&iid=58&rid=1622 First version, 2014

Related works:
Journal Article: The Price Tag of Tourism: Does Tourism Activity Increase the Prices of Goods and Services? (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:sek:iacpro:0301622

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