A Global Perspective: Tourism, Terms of Trade and Welfare of the Poor

The paper investigates the impact of an increase in tourism and a change in the terms of trade on the
welfare of different classes in an economy. We set up a three-sector, three-factor (one specific) model
of general equilibrium to derive the results. The most important result we obtain is that tourism can
immiserize the poor. In the concluding section we argue that a tax on tourism (a non-distortionary
tax) should be used to subsidize the poor and restore their welfare level.