Is tourism the new Dutch disease? Impacts on wages, sectorial competitiveness and economic growth

Oscar Afonso; Paulo B. Vasconcelos; Luis Pinto

doi:10.3934/jdg.2024034

Article Contents

2025, Volume 12, Issue 4: 465-483. Doi: 10.3934/jdg.2024034

This issue Previous Article Exogenous regional productivity asymmetries in a core-periphery model Next Article Educational spread as a 'Coordination Game' – theory and application to Portugal

Is tourism the new Dutch disease? Impacts on wages, sectorial competitiveness and economic growth

1.
Centro de Economia e Finanças da Universidade do Porto, Faculdade de Economia, Portugal
2.
Centro de Matemática da Universidade do Porto, Faculdade de Economia, Portugal

^*Corresponding author: Paulo B. Vasconcelos
^*Corresponding author: Paulo B. Vasconcelos

Received: June 2024

Revised: November 2024

Early access: January 2, 2025

Published online: January 2, 2025

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Abstract

This study explores the implications of tourism on wages, sectoral competitiveness, and economic growth, employing an endogenous growth model that extends [2]. The respective effects on R&D activities that spread throughout the entire economic system are analyzed by considering the concept of a potential "Dutch disease" associated with tourism. Despite existing concerns about a possible "Dutch disease" effect triggered by an increasing reliance on the tourism sector, the impact on the Portuguese economy is not definitively negative. It has promoted R&D and stimulated domestic consumption. If the R&D induced by the tourism openness of the economy is sufficiently large, it may potentially stimulate more remarkable long-term economic growth. This outcome largely depends on the Portuguese economy's ability to capitalize on idea exchange, openness, and policies that vigorously promote R&D.

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Mathematics Subject Classification: Primary: 91B02, 91B55, 91B62; Secondary: 65L05.

Citation:

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Figure 1. Path of the technological-knowledge-bias towards the steady state

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Figure 2. Path of the wage premium towards the steady state

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Figure 3. Technological bias dynamics under different $ \theta_{S} $

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Table 1. Steady-state endogenous growth rate $ g^{*} $ under different $ \theta_{S} $

Calibration	$ \theta_{H}=\theta_{L}=0 $	$ \theta_{H}=0.03, \theta_{L}=0.08 $	$ \theta_{H}=0.06, \theta_{L}=0.16 $
Scenario	(no tourism)	(baseline)	(twice the baseline)
$ g ${*}	$ 2.08\% $	$ 2.06\% $	$ 2.04\% $

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Table 2. Impact of the tourism innovation $ \gamma_{H} $ on steady-state economic growth

Calibration	$ \gamma_{H}=0.5 $	$ \gamma_{H}=1.2 $ (baseline)	$ \gamma_{H}=3 $
Scenario	(Low R&D benefits)	(baseline)	(High R&D benefits)
$ g ${*}	$ 2.05\% $	$ 2.06\% $	$ 2.09\% $

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