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Environmental regulations for a small open economy with tourism

journal contribution
posted on 2008-01-01, 00:00 authored by Chi-Chur Chao, B R Hazari, J P Laffargue, E S H Yu
Purpose - 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. Methodology/approach - The general-equilibrium analysis is employed to study environmental regulations for a small open economy with tourism. Findings - 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. Originality/value of chapter - The presence of tourism can alter the welfare implications of the traditional trade policy.

History

Journal

Frontiers of economics and globalization

Volume

5

Article number

Chapter 16

Pagination

269 - 284

Publisher

Emerald

Location

Bingley, Eng.

ISSN

1574-8715

Language

eng

Publication classification

C1.1 Refereed article in a scholarly journal; C Journal article

Copyright notice

2008, by Emerald Group Publishing Ltd.

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