The economic impacts of tourism-related private investment in Jamaica

Abstract

This study assesses the economy-wide impacts of private investment in the hotel industry in Jamaica. Specifically, the paper develops a tourism-extended social accounting matrix (SAM) and a dynamic computable general equilibrium (CGE) model tailored to the Jamaican economy. To analyse impacts in terms of poverty and inequality, the CGE model results are linked with a microsimulation model. The results demonstrate that private tourism investments leading to an expansion of foreign demand for tourism can have positive impacts on national economies in terms of gross domestic product (GDP), employment, household incomes and poverty reduction. However, the distribution of benefits is dependent on socioeconomic factors such as the distribution of factor endowments among households. At the sectoral level, sectors catering more directly to tourism experience the highest rates of growth, while more export-oriented sectors do not fare as well given the upward pressure on prices and the real exchange rate resulting from higher tourism spending.