Edgar J. Sánchez Carrera

Tourism's Impact on Long-Run Mexican Economic Growth

Tourism is one of the most important factors in the productivity of Mexican economy with significant multiplier effects on economic activity. This paper investigates possible causal relationships among tourism expenditure, real exchange rate and economic growth by using quarterly data. Johansen cointegration analysis shows the existence of one cointegrated vector among real GDP, tourism expenditure and real exchange rate where the corresponding elasticities are positive. The tourism-led growth hypothesis is confirmed through cointegration and causality testing. Tourism expenditure and Real Exchange Rate (RER) are weakly exogenous to real GDP. A modified version of the Granger Causality test shows that causality goes unidirectionally from tourism expenditure and RER to real GDP. Impulse response analysis shows that a shock in tourism expenditure produces a short fall and then a positive effect on growth.

THE EVOLUTIONARY GAME OF POVERTY TRAPS

We study a coordination game, between a leader population and a follower population. Each individual of each population follows an imitative behavior in order to decide between being a high�? or low�?type economic agent. We show that individual behavior driven by imitation can lead to an economy that is either in a low�?level equilibrium - a poverty trap - or a high�?level equilibrium. We analyze how possible it is for an economy placed in the basin of attraction of the poverty trap to overcome it through the strategic action (limited on time) of a benevolent central planner.

Inequality and economic growth in China

Purpose - The purpose of this paper is to study the long-run relationship between economic growth and income inequality in China during the pre-reform (1952-1978) and post-reform (1979-2007) periods, this will be done via cointegration analysis. Design/methodology/approach - The aim of this paper is to offer a proper answer to the issue of the inequality-growth nexus by using a cointegrated VAR-setting approach, in this way, the study can cope and avoid the problems of parameter heterogeneneity, omitted variable bias and endogeneity, from which the model of macroeconometric analysis suffers. Findings - The cointegration analysis shows that, for both periods the relationship is positive and the inequality-growth elasticity has grown in the second period. In addition, a more robust test of Granger-causality suggested by Toda and Yamamoto indicates that whereas in the first period there is unidirectional causality from inequality to growth, there is no directional causality in the second period. Practical implications - The pre-reform period going from 1952 to 1978 is characterized by the adoption and implementation of a Soviet-type economy. The economy showed a modest annual economic growth rate of 2.33 percent and very low levels of inequality, with an average Gini coefficient of 0.27. The post-reform period tried to combine central planning with market-oriented reforms to increase productivity. In fact, the economy has grown at an annual growth rate of 7.07 percent since 1979 and also the inequality with an average Gini coefficient of 0.33. Originality/value - The paper studies the relationship between income inequality and economic growth in China during the pre and post reform periods. A significant and positive long-run relationship between inequality and economic growth in both periods was found. The inequality-growth elasticity is greater in the post-reform than the pre-reform period. Using a more robust Granger causality test the authors find a unidirectional predetermination between the variables for the whole period and for the pre-reform period. However, there is not causality in the post-reform period. Except the urban-rural disparity which explains the unidirectional causality from inequality to growth, pre-reform China was basically an egalitarian society. In the pre-reform period, the low inequality was identified as a strain on economic growth. However, the reform period has seen remarkable growth. Although regional inequality and the rural-urban gap declined from the late 1970s to the mid-1980s, both have increased rather dramatically since the mid-1980s.

Inflation and Mexican economic growth: long‐run relation and threshold effects

Purpose - The purpose of this paper is to estimate the long-run relationships and threshold effects between inflation and economic growth in Mexico. Design/methodology/approach - The paper shows the existence of such relationship in a cointegrated vector on economic growth (log of real gross domestic product (GDP)) and inflation rate finding a corresponding elasticity significantly negative. Moreover, the causal relationship between these two series is studied using a more robust Granger causality test, without finding any directional causality between them. Findings - The estimated threshold model suggests 9 percent as the threshold level (i.e. structural break point) of inflation above which inflation significantly slows the Mexican economic growth. Research limitations/implications - This paper uses the cointegration technique, and finds a significant and negative long-run relationship between inflation and economic growth for the Mexican economy. In addition, it is found that inflation is weakly exogenous. In the period 1970-2007 real GDP was elastic with respect to inflation, and therefore, considering the estimated coefficient, an increase of 1 percent on inflation produces a decrease of 1.5 percent on real GDP. Since, for most of the period under consideration Mexico experienced inflation rates higher than 10 percent, this result is consistent with most of the research suggesting that high levels of inflation produce a negative effect on economic growth. Practical implications - The analysis could be useful for policymakers in providing some clue in setting an optimal inflation target. For instance, the Mexican Central Bank could apply an expansionary monetary policy for supporting economic growth until the inflation rate does not exceed the threshold level. In fact, the threshold analysis suggests that if the inflation rate exceeds 9 percent, then Mexicos current favorable economic performance might be jeopardized. Originality/value - Specifically, this paper focuses on two questions: is there any long-run relationship between economic growth and inflation in Mexico? Is there a statistically significant threshold level of inflation above which inflation affects growth differently than at lower inflation rates in Mexico? Motivated by these questions, this present paper first examines cointegration techniques and then, threshold estimations.

The Effects on Environmental Investment of Changes in Tourism Demand

In this short paper we analyze the impact of tourist demand in hotel rooms on the investment of hotels on environmental quality. We show that when income of the tourists increases, then to maintain the demand for rooms, the hotels must in-crease the investment on the environmental quality of the region where there is an increment of the tourist activity. In the particular case where we have three differ-ent hotel chains located in three different tourist regions, we show that the incen-tive of hotel chains to invest in environmental quality depends on the demand for days of rest on the part of tourists and on the level of aggregate income. We also show that if total income increase, then the incentive to invest in environmental quality increases in the region where the price of a hotel room is lower.

Imitative Behavior in a Two-Population Model

We study an evolutionary game with two asymmetric populations where agents from each population are randomly paired with members of the other population. We present two imitation models. In the first model, dissatisfaction drives imitation. In the second model, agents imitate the successful. In the first model, we use a simple reviewing rule, while in the second model we use a proportional imitation rule where switching depends on agents comparing their payoffs to others’ payoffs. We show that such imitative behavior can be approximated by a replicator dynamic system. We characterize the evolutionarily stable strategies for a two asymmetric populations normal form game and we show that a mixed strategy is evolutionary stable if and only if it is a strict Nash equilibrium. We offer one clear conclusion: whom an agent imitates is more important than how an agent imitates.

Evolutionarily Stable Strategies and Replicator Dynamics in Asymmetric Two-Population Games

We analyze the main dynamical properties of the evolutionarily stable strategy ESS for asymmetric two-population games of finite size in its corresponding replicator dynamics. We introduce a defnition of ESS for two-population asymmetric games and a method of symmetrizing such an asymmetric game. Then, we show that every strategy profile of the asymmetric game corresponds to a strategy in the symmetric game, and that every Nash equilibrium (NE) of the asymmetric game corresponds to a (symmetric) NE of the symmetric version game. So, we study (standard) replicator dynamics for the asymmetric game and define corresponding (non-standard) dynamics of the symmetric game.

Preservation of Environmental Quality and Tourist Investments

The aim of this paper is to show that the incentive of hotel chains to invest in environmental quality depends on the demand in days of rest on the part of tourists and on the level of aggregate income. The framework is based on the theoretical model of horizontal differentiation a la Hotelling introduced in [5]. We modify this model by introducing a demand function for tourism commodities. We show that an increase on total income incentives hotel chains in the regions whit higher demand to invest in environmental quality.

Corruption, Inequality and Income Taxation

It is recognized that corrupt behavior determines the institutional types of an economic system where an institution is ruled out by economic agents (e.g. officials-public or private) abusing their role to procure gain for themselves (rent-seeking activities) or somebody else. In this vein, we study an evolutionary model of institutional corruption. We show that income inequality and income taxation are the main factors (explanatory variables) for fighting institutional corruption. We conclude with some feasible policies on institutions, beliefs and incentives to combat the corruption.

On the Dynamics and Effects of Corruption on Environmental Protection

This paper studies the joint dynamics of corruption and pollution in a model of evolutionary game theory, where firms face a given pollution standard and the government must check the compliance to this standard by means of public officials who can be honest or not. A novelty of our paper is that officials decide to be honest or not by imitation, while firms are assumed to be inter-temporal profit maximizers. One of the main findings of the paper is that one possible “ bad” outcome characterised by a whole society of polluting firms and corrupt officers can be sustained by rational agents who learn by imitation, despite the existence of multiplicity of equilibria of a perfectly honest population and a more realistic simultaneous presence of honest and dishonest agents. Furthermore, we show that the firm’s discount rate is an important decision factor that influences the environmental pollution.