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Tourism, Capital and Labor Inflows and Regional Development

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Abstract

The paper considers an open rural region of a developed country with two sectors, an environmentally sensitive agricultural industry and locally operated tourism that generates pollution. We find that if the representative resident’s preference for environmentally friendly tourism services is low, the introduction of additional capital, labor, and tourists promoted by the local government may harm native inhabitants’ economic welfare. Even if tourism is environmentally friendly, the inflow of capital or labor may still have negative effects. On the contrary, if each resident’s preference for tourism service is high, an increased flow of tourists from outside may have positive effects.

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Notes

  1. A number of empirical studies of tourism promotion and regional development have accumulated in the literature, focusing on the role of tourism and the effects of a tourism promotion policy. For example, Schubert et al. (2011) studied the impact on the economic growth of a small tourism-driven economy of an increase in the growth rate of international tourism demand. Several studies have focused on small island developing states for which tourism was the only means of enhancing economic growth (Pratt 2015; Bojanic and Lo 2016). Antonakakis et al. (2015) examined the dynamic relationship between tourism and economic growth, using a new spillover index approach. Given that those studies did not incorporate the negative effect of tourism that damages the environment, however, the present study complements them by presenting a small open regional economy model in which tourism causes pollution.

  2. Tourism industries often consume excess natural resources, seriously damage the natural environment, and make it impossible to maintain economic sustainability. Thus, tourism promotion and environmental protection have been considered to be a paradox. Several empirical case studies have focused on this point such as Lim and McAleer (2005), Logar (2010), Farmaki et al. (2015), Lee and Hsieh (2016), and Ng et al. (2017).

  3. Various aspects of the interrelationship between tourism and trade have been discussed, for example, by Copeland (1991), Hazari and Ng (1993), Hazari and Kaur (1995), Hazari and Nowak (2003), Hazari et al. (2003), Nowak et al. (2003), and Hazari and Sgro (2004).

  4. For example, on Himaga-jima island, according to the national census in 2010, 40% of residents were engaged in the fishery industry, 53% of residents were in tourism, and only 6% of residents were engaged in manufacturing (i.e., the fish processing industry).

  5. To contrast differences between the urban and rural economies, Harris and Todaro (1970) reasonably assumed full employment in rural areas, while in urban areas, because of the minimum wage restriction, the existence of unemployed workers was assumed.

  6. An example is the Tremiti islands, in which tourism booms only during high season.

  7. In this model, following Copeland and Taylor (1999), production in the agricultural sector is carried out by labor inputs. This one-factor Ricardian model may look unrealistic, but it is not a simple formulation because the role of the environmental stock is another input like land that also determines labor productivity.

  8. Capital and labor from outside include both foreign and domestic inputs.

  9. Assume a rural area of a developed country, where introduction of workers from outside is a reasonable solution to avoid economic decline caused by labor shortages.

  10. For example, the Tremiti islands located off the coast of the Gargano peninsula are tourist spots with beautiful beaches and a historical heritage. Most tourists who visit these islands are from the same region, Regione Pouglia. Some tourists come from Germany, where no tropical beaches exist, but most visitors are Italian. Similarly, most guests to the three Aichi islands (Shino-jima, Himaga-jima, and Saku-shima) are from the Tokai area. Tourists from outside the region are rare and only ever stay for relatively short periods.

  11. See the Online Supplemental Appendix for a proof.

  12. Note that Eq. 29 holds as long as Eq. 23 holds. This implies that the inverted U-shaped effect of outside workers LM on welfare can be attributed, at least partially, to the inverted U-shaped effect of LM on pT.

  13. This is derived by differentiating (19) with respect to β and LM.

  14. In this case, one possible way to enhance their welfare could be to develop the agriculture sector, whereby workers would switch from tourism to agriculture.

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Acknowledgments

This study is conducted as part of a joint research project undertaken at the Institute for Advanced Collaborative Research, Chukyo University. The authors gratefully acknowledge partial financial support from the Institute.

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Authors and Affiliations

  1. School of Economics, Chukyo University, 101-2 Yagotohonmachi, Showa-ku, Nagoya, 466-8666, Japan

    Yuichi Furukawa & Kenji Kondoh

  2. Department of Economics, Aichi University, 4-60-6 Hiraike-cho, Nakamura-ku, Nagoya, 441-8622, Japan

    Shigemi Yabuuchi

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  1. Yuichi Furukawa
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  2. Kenji Kondoh
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Correspondence to Kenji Kondoh.

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Furukawa, Y., Kondoh, K. & Yabuuchi, S. Tourism, Capital and Labor Inflows and Regional Development. Int Adv Econ Res 25, 221–233 (2019). https://doi.org/10.1007/s11294-019-09733-8

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