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Staff Paper No. 502 - Abstract

Is Tourism-Based Development Good for the Poor? A General Equilibrium Analysis for Thailand

Anan Wattanakuljarus
Ian Coxhead [coxhead@wisc.edu]

Staff Paper No. 502, November 2006, 52p.

Abstract

The popularity of tourism as a component of development strategy in low-income countries is founded in part upon the belief that expansion of this industry will improve income distribution by greatly expanding demand for relatively low-skilled labor. We examine this belief for the case of Thailand, a highly tourismintensive economy, using a new and specifically-designed applied general equilibrium model. A boom in inbound tourism demand generates foreign exchange and raises household incomes across the board, but worsens their distribution. Tourism sectors are not especially labor-intensive, and the expansion of foreign tourism demand brings about a real appreciation that undermines profitability and reduces employment in tradable sectors, notably agriculture, from which the poor derive a substantial fraction of their income. We examine the robustness of these results with respect to alternative factor market assumptions relevant to the Thai economy.
Last updated on Wed, Feb 7, 2007 3:18pm