Environmental Protection and Tourism with Urban Unemployment

This study investigates the combined effects of tourism promotion and environmental protection, via a pollution tax, in labor-surplus developing economies. While tourism is expected to provide employment and improve national welfare, the tax is expected to have the opposite effect. This paper is the first of its kind to examine the interaction between tourism and environmental protection by considering production as well as consumption externalities. The results show that, under certain conditions, tourism promotion expands the tourism sector, increases unemployment, and improves welfare. Conversely, under certain conditions, an increase in the pollution tax contracts the sector, decreases unemployment, and reduces welfare. JEL Classifications: F16, O13, O18