DP12644 Tourism and Economic Development: Evidence from Mexico's Coastline

Author(s): Benjamin Faber, Cécile Gaubert
Publication Date: January 2018
Keyword(s): economic development, Gains from trade, spatial equilibrium, Tourism
JEL(s): F15, F63, O24
Programme Areas: International Trade and Regional Economics, Development Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=12644

Tourism is a fast-growing services sector in developing countries. This paper combines a rich collection of Mexican microdata with a quantitative spatial equilibrium model and a new em- pirical strategy to study the long-term economic consequences of tourism both locally and in the aggregate. We find that tourism causes large and significant local economic gains relative to less touristic regions that are in part driven by significant positive spillovers on manufacturing. In the aggregate, however, these local spillovers are largely offset by reductions in agglomeration economies among less touristic regions, so that the national gains from trade in tourism are mainly driven by a classical market integration effect.