ABSTRACT The paper investigates the impact of an increase in tourism and a change in the terms of trade on the welfare of different classes in an economy. We set up a three-sector, three-factor (one specific) model of general equilibrium to derive the results. The most important result we obtain is that tourism can immiserize the poor. In the concluding section we argue that a tax on tourism (a non-distortionary tax) should be used to subsidize the poor and restore their welfare level.
Cite this paper
nullB. Hazari and J. Lin, "Tourism, Terms of Trade and Welfare to the Poor," Theoretical Economics Letters, Vol. 1 No. 2, 2011, pp. 28-32. doi: 10.4236/tel.2011.12007.
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