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CAN NATURE PROMOTE DEVELOPMENT?

Can nature promote development? – The role of sustainable tourism for economic growth

Study abstract:
We analyze whether biodiversity is enhancing the development process in developing countries (DCs) via increasing tourism receipts in a trade based endogenous growth framework. The underlying assumption is that a rich biodiversity – only if used sustainably – provides a comparative advantage in tourism for most DCs. The main empirical findings are that biodiversity while being significantly and positively correlated with inbound tourism receipts in DCs, has no significant relation with tourist arrivals. This can be interpreted as an indicator that mass tourism is not influenced by biodiversity whereas individual tourism (as the superior good) is.

Consequently, we are able to show empirical a positive influence of sustainable tourism on economic growth. Therefore, it may be a promising development strategy to invest in biodiversity and attract high budget tourists.

1. Introduction
International trade in tourism has become an important source of revenues for developing countries (World Tourism Organization 2008). This trend is feeding hopes that the development process can be enhanced without taking the same route as industrialized countries, i.e. via leap-frogging. A huge literature is supporting this view. At the same time, environmentalists fear that increasing tourism destroys significant parts of the environment and reduces biodiversity in developing countries.
A worsening environmental quality may be adverse to economic growth; at least in the long run. This concern has increasingly been taken into consideration in development economics. We also consider it by discussing the question of how and to what extent biodiversity can be interpreted as an input for sustainable growth.

Applying a trade based growth-model, we discuss the chance to use biodiversity as a driver of development, thereby overcoming the trade-off between economic and ecological aspects. Based on earlier work by Freytag and Vietze (2009), which shows that (1) biodiversity is constituting a comparative advantage in tourism, that (2) the degree of endangered biodiversity is negatively affecting absolute inbound tourism receipts and that (3) the degree of biodiversity is positively affecting these receipts, we analyze how these results change when we focus on tourism arrivals rather than tourism receipts. This difference may be crucial as both the data for receipts and arrivals do not distinguish between sustainable (individual) and mass tourism. However, we can assume that spending in tourism is faster responding to income rises of potential tourists than the number of arrivals, i.e. their increasing income in countries of origin does not increase the number of arrivals to the same extent as the receipts in the destination countries. Arrivals thereby rather mirror mass tourism, where receipts can be a proxy for sustainable tourism. Hence, the latter is treated as a superior good, whereas mass tourism is not.

The remainder of this paper is organized as follows. After a literature review about the effects of tourism on growth, we first theoretically and in a second step empirically analyze how tourism can affect economic growth via biodiversity.
Cautious policy conclusions round off the paper.

Writers:
Andreas Freytag (A.freytag@wiwi.uni-jena.de) is Professor of Economic Policy at the Friedrich-
Schiller-University in Jena, Chair for Economic Policy
Christoph Vietze (Christoph.Vietze@uni-jena.de) is a Researcher in Economic Policy at the
Friedrich-Schiller-University in Jena, Chair for Economic Policy

This article is quoted from the Jena Economic Research Papers 2010 – 008, download the entire report through this link.

This article is uploaded by Majbritt Thomsen, administrator on ‘Views On Tourism’.

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Posted in Best practice, Development, Market knowledge, Performance and management, Policy, Sustainability, World.


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