Tourism- versus non-tourism-led growth: Which is superior?

This study reveals the underlying mechanism by which tourism expansion drives long-term economic growth and compares it to non-tourism-led growth. We perform long-run simulations (up to 30 years) using a general equilibrium model with dynamic macroeconomic properties that considers the economy's transition between steady states on a balanced growth path. We find that whether or not tourism can drive growth depends on its relative capital intensity compared to the rest of the economy. In our case, the expansion of tourism alters sectoral rates of return, leading to inter-sectoral shifts that encourage a higher capital stock. As output per worker increases, the economy becomes more productive. In the absence of mining, tourism is among the leading drivers of growth.