hrvatski

Tourism, welfare and income distribution: the case of Croatia

This paper aims to investigate how a change of inbound tourism demand affects disposable income and household consumption and to provide a means of answering the question of wheatear tourism can be a generator of more equal income distribution. Changes in resident welfare caused by the growth of international tourism expenditure were measured by the equivalent variation. Simulation results showed that the expansion of tourism had a positive impact on the household welfare. However that impact was less than expected. It can be explained with the fact that production and exports in non-tourism sectors declined, which was indirectly reflected in the total household income. Among other, welfare loss occurred because tourist demand for goods and services was partly met by the increased imports and the fact that there has been a decline in the demand for labor in sectors not directly related to tourism. However, the growth in household income from labor and growth in household consumption, along with the fact that the growth of consumer price index was lower than the growth of real wages, has lead to a positive net effect on welfare. In addition to changes in the household welfare, the paper tried to answer the question of how the increase of inbound tourist demand affected the distribution of income. The distributional effects at national level measured by Atkinson index showed that inbound tourism can reduce inequality, but effects were much lower if Gini coefficient was taken as an indicator of inequality.

Tourism; welfare; income distribution; Croatia

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