Tourism and Welfare Losses in an Open and Dynamic Economy

Abstract

[eng] With the development of globalization, open economy has gradually become the dominant mode of economic development in various countries. As a transnational and trans-regional industry, tourism has shown a significant growth trend in many developing and developed countries. This growth not only represents an increase in foreign exchange earnings, job creation and balanced regional economic development, but also brings a range of socioeconomic impacts, especially for the welfare of local residents. This study aims to explore the correlation between tourism and welfare loss in the context of open economy. In order to explore this complex relationship, we take Ramsey model as the theoretical basis and further calibrate it, especially using the relevant tourism data of Hong Kong for empirical research. Through these in-depth analyses, we conclude that while tourism may bring economic benefits in the short term, over-reliance on tourism may lead to welfare losses in the long run. This finding is a reminder to policymakers and decision makers that when they think about tourism policies, they should think more fully and deeply about long-term impacts, not just short-term benefits.