Rainer Andergassen

Less Developed Countries, Tourism Investments and Local Economic Development

The present paper analyzes the forward linkages of a multinational’s investment in a resort which kicks off tourism activity in a LDC. We show that, under quite natural assumptions, overnight stays are increasing in the number of tourism related, differentiated goods and services supplied in equilibrium. These goods and services, if supplied by the local community, represent forward linkages of FDI in tourism. We investigate the multinational’s incentives to promote, reduce or eliminate these forward linkages and the effectiveness of some policy instruments available to a local government to leverage on the presence of FDI and to stimulate domestic entrepreneurship.

Development Strategies for Tourism Destinations: Tourism Sophistication vs. Resource Investments

This paper investigates the effectiveness of development strategies for tourism destinations. We argue that resource investments unambiguously increase tourism revenues and that increasing the degree of tourism sophistication, that is increasing the variety of tourism related goods and services, increases tourism activity and decreases the perceived quality of the destinations resource endowment, leading to an ambiguous effect on tourism revenues. We disentangle these two effects and characterize situations where increasing the degree of tourism sophistication is a viable development strategy and where it is impracticable and describe the optimal policy mix.

The management of tourism destinations: A policy game

Real-world tourism destinations differ in the way they develop and are managed. This is mainly due to the complexity of the tourism product (a bundle including both complementary and substitute goods and services) and the type of primary resource. Moreover, the planning of tourism and the policy of the destination depend on coordination and cooperation among several agents (private companies, public bodies and hybrid agents) on a plethora of issues. This article deals theoretically with the alternative patterns of strategic interaction that can be played by the different stakeholders of the destination: private agents can either play cooperative or non-cooperative pricing strategies, while the optimal investment policy for the destination management depends on the timing of the game (private and public agents’ moves can either be simultaneous or sequential). By jointly considering the two features of cooperation and game timing, the authors are able to identify four different cases for their policy model. They show that the solutions of these cases generally differ and, if private agents are coordinated, the policymaker’s choice between simultaneous and sequential moves is irrelevant. On the contrary, if agents are not coordinated, the policymaker prefers to use its first-move advantage in the sequential game in order to reduce the inefficiency stemming from the non-coordination of prices. The results are carefully discussed with respect to the peculiarity of the tourism product (where mainly complementary goods are included) and to the different patterns of destination management which are observed worldwide.

Innovation, Specialization and Growth in a Model of Structural Change

The aim of this paper is to investigate the nexus between demand patterns and innovation as it stems from research efforts and the extent of specialization. In the proposed model an innovation race conducted by entrants investing in research and development against established incumbents raises productivity at the industry level and leads to a shift in the aggregate demand pattern and consequently to a redistribution of the profit fund among industries and a restructuring of the production process in each industry. The paper argues that the degree of development as reflected in a demand share distribution is characterized by a corresponding distribution of specialized sectors that becomes more even across industries as the development process proceeds and investigates the consequences in terms of economic growth.

Natural disasters, mitigation investment and financial aid

We consider firms facing the risk of natural disasters and study their problem of investing in mitigation if financial insurance is not available. The firms problem is to choose the optimal timing and size of the investment. The timing problem leads to a critical productivity size where firms above it invest in mitigation while firms below the threshold decide to not invest. We investigate how cash aid such as emergency response, and in-kind aid such as reconstruction, rehabilitation or disaster risk reduction investments, affect the critical productivity threshold and the optimal investment size and characterize the international donors optimal charity strategy.