Growth, Conventional Production and Tourism Specialisation: Technological Catching-up Versus Terms-of-Trade Effects

This paper extends the ’expanding-varieties’ growth model in a two-countries-two-goods setup, and describes the dynamics of growth rates and terms of trade when the industry-based economy is the innovation leader, while the tourism-based economy is the follower (i.e. increases the number of intermediate inputs by readapting innovations developed abroad). Two types of transitional dynamics may exist: technological catching-up and technological falling-behind. Contrary to the standard result, technological catching-up by the follower is associated with lower growth rates with respect to the leader, whereas terms-of-trade effects guarantee positive growth differentials for the tourism-based economy when the technological gap with the leader increases over time. The underlying principle of ’increased relative demand’ might explain the good economic performance observed in tourism-dependent economies.


Issue Date:
2005
Publication Type:
Working or Discussion Paper
PURL Identifier:
http://purl.umn.edu/12139
Total Pages:
32
Series Statement:
NRM Nota di Lavoro 140.2005




 Record created 2017-04-01, last modified 2017-08-23

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