Pasquale M. Sgro

Tourism, Dutch Disease And Welfare In An Open Dynamic Economy

This paper examines the effects of an expansion in tourism on capital accumulation, sectoral output and resident welfare in an open economy with an externality in the traded good sector. An expansion of tourism increases the relative price of the nontraded good, improves the tertiary terms of trade and hence yields a gain in revenue. However, this increase in the relative price of nontraded goods results in a lowering of the demand for capital used in the traded sector. The subsequent de-industrialization in the traded good sector may lower resident welfare. This result is supported by numerical simulations.

Tourism, trade and national welfare

Volume 265 of the Contributions to Economic Analysis book series covers, among others, subject areas such as Tourism and Trade; A Two-Sector General Equilibrium Model of a Small Open Economy; Non-Traded Goods and Tourism in the Pure Theory of Trade; Tourism, Taxes and Immiserization in a Two-Country Trade Model; Price Discrimination, Tourism and Welfare; Guest Workers and Resident Immiserization; Terms of Trade and Resident Welfare; Tourism in the Generalized Harris-Todaro Model and Regional Immiserization; and Growth in a Dynamic Model of Trade.

Urban-rural structural adjustment, urban unemployment with traded and non-traded goods

Abstract This paper extends the Harris-Todaro model to include non-traded goods and to analyze structural adjustment in LDCs. We assume that the urban region produces two goods: a manufactured good and an urban non-traded good, and the rural region also produces two commodities: an agricultural and a rural non-traded good. Our results reveal an asymmetry in the behaviour of the urban and rural regions in response to parametric changes or external shocks. The effects of such changes on the endogenous urban variables are completely determinate. However, the responses of the endogenous variables in the rural region are ambiguous. A deterioration in the terms of trade increases the relative price of the urban non-traded good and increases its output at the expense of the urban traded good. Thus structural adjustment in urban and rural areas may be in opposite directions. Non-regional models of structural adjustment ignore the possibility of having opposite effects in the urban and rural areas. Our results also provide a generalization of the Dutch Disease type phenomenon to a model with migration and unemployment.

The Simple Analytics of Optimal Growth with Illegal Migrants

This paper analyses the impact of illegal migration on the optimal path of domestic (resident) consumption. The analysis draws two importants conclusions. First, if illegal migrants and domestic labour are perfect substitutes, illegal migration necessarily lowers the long-run per capital consumption of domestic residents. Second, if illegal migrants and domestic labour are imperfect substitutes, the effect on the long-run per capital domestic consumption is ambiguous, however, in the Cobb-douglas case, the result is clear cut an per capita domestic consumption rises as a result of illegal migration.

Tourism, jobs, capital accumulation and the economy: A dynamic analysis

This paper examines the effects of tourism in a dynamic model of trade on unemployment, capital accumulation and resident welfare. A tourism boom improves the terms of trade, increases labor employment, but lowers capital accumulation. The reduction in the capital stock depends on the degree of factor intensity. When the traded sector is weakly capital intensive, the expansion of tourism improves welfare. However, when the traded sector is strongly capital intensive, the fall in capital can be a dominant factor in lowering national welfare. This dynamic immiserizing result of tourism on resident welfare is confirmed by simulations on German data.

Migration, unemployment and trade

Migration, Unemployment and Trade focuses on the issues of migration, welfare and unemployment in a trade and development framework. Several chapters of the book analyze the implications of internal labor mobility in a model designed to highlight its implications for regional welfare, urban unemployment, rural-urban dichotomy and structural adjustment. An important innovation in this work is the disaggregation of the economy and the use of separate utility functions to highlight non-homogeneity of preferences. The book also deals with international mobility of factors in different frameworks. In particular it concentrates on the highly emotive issue of legal and illegal migration. Thus this work incorporates interesting and important features of labor economics and factor mobility into trade and distortion theory.

Technology Transfer, Quality Standards, and North–South Trade

This paper examines the economic consequences of technology transfer through licensing in a North–South model of vertical product differentiation, based on a product-line pricing framework. With its limited technological expertise, the southern firm cannot export to the northern market without purchasing the northern firms “clean” and low-cost technology. With North–South cost-asymmetry, we conclude that the transfer of technology through licensing promotes trade, product variety and improves global welfare. However, without government intervention, the private levels of product quality chosen by firms tend to be lower than the socially optimal levels. This finding helps to explain why developed countries often set quality standards for imported foreign products.

Optimal Licensing Policy Under Vertical Product Differentiation

This paper explores a vertical product differentiation model with a licensing arrangement between a multinational firm with superior technology and a domestic firm with obsolete technology. We find that a subsidy provided by the domestic countrys government to the domestic firm to assist with the licensing arrangement is welfare enhancing for the domestic country. Furthermore, both the multinational firm and the domestic country are better off under royalty than under fixed fee licensing. These findings stand in contrast to earlier results in the literature.

Foreign Aid, Wage Inequality and Welfare for a Small Open Economy with Tourism

While the welfare effect of foreign aid has been extensively analyzed, the impact on the distribution of income has received less attention. At the same time, there has been recent work on tourism where it is complementary to aid in improving welfare. By combining these two strands, this paper concentrates on wage inequality in developing countries. We find that an increase in aid in the form of tied aid can lower the relative price of nontraded goods. The rent extracted from tourists declines, reducing welfare of domestic residents. In addition, the fall in the nontradable price can widen the wage inequality between skilled and unskilled workers. Thus, increased foreign aid may have detrimental effects on national welfare and the distribution of income. Rising wage inequality is confirmed by numerical simulations.

Illegal Migration, Border Enforcement and Growth

In several chapters we have analysed the consequences of both internal and international migration of labour in the context of models of international trade. However, in all chapters, except parts of chapter eight, international migration has been treated as legal migration. As noted earlier, illegal migration is a worldwide phenomenon; present both in third world and advanced economies. For example, India receives illegal migrants from Nepal and Bangladesh. Americans receive both legal andlor illegal migrants from its neighbouring countries. Both types of migrants are of great concern to politicians and policy makers, since such migration has an impact on resident welfare1.