Recession and Policy Transmission to Latin American Tourism: Does Expanded Travel to Cuba Offset Crisis Spillovers?

 
Author/Editor: Wolfe, Andrew M. ; Romeu, Rafael
 
Publication Date: February 01, 2011
 
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Disclaimer: This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate
 
Summary: This study measures the impact of changing economic conditions in OECD countries on tourist arrivals to countries/destinations in Latin America and the Caribbean. A model of utility maximization across labor, consumption of goods and services at home, and consumption of tourism services across monopolistically competitive destinations abroad is presented. The model yields estimable equations arrivals as a function of OECD economic conditions and the elasticity of substitution across tourist destinations. Estimates suggest median tourism arrivals decline by at least three to five percent in response to a one percent increase in OECD unemployment, even after controlling for declines in OECD consumption and output gaps. Arrivals to individual destination are driven by differing exposure to OECD country groups sharing similar business cycle characteristics. Estimates of the elasticity of substitution suggest that tourism demand is highly price sensitive, and that a variety of costs to delivering tourism services drive market share losses in uncompetitive destinations. One recent cost change, the 2009 easing of restrictions on U.S. travel to Cuba, supported a small (countercyclical) boost to Cuba’s arrivals of U.S. non-family travel, as well as a pre-existing surge in family travel (of Cuban origin). Despite the US becoming Cuba’s second highest arrival source, Cuban policymakers have significant scope for lowering the relatively high costs of family travel from the United States.
 
Series: Working Paper No. 11/32
Subject(s): Business cycles | Caribbean | Cuba | Demand | Developed countries | Economic models | Economic policy | Economic recession | Latin America | OECD | Spillovers | Tourism | Travel | United States

Author's Keyword(s): Cuba | US | Tourism | Caribbean
 
English
Publication Date: February 01, 2011
Format: Paper
Stock No: WPIEA2011032 Pages: 32
Price:
US$18.00 (Academic Rate:
US$18.00 )
 
 
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