Anan Wattanakuljarus AAE-875 Growth, trade and the environment in developing countries.

Anan Wattanakuljarus

AAE-875

Growth, trade and the environment in developing countries

ContentsContents1. The Overview of Thai Economy

– Thai Sectors: GDP, Labor, and Wage – Thai Core Environment Indicators– Thai Tourism Industry

2. The General Equilibrium Model– Expenditure and Revenue Function– Equilibrium Conditions– Welfare Analysis

3. The Policy Implications

The Overview of The Overview of Thai Economy:Thai Economy:

Thai SectorsThai Sectors

Percentage share of GDP at 1988 pricesPercentage share of GDP at 1988 prices

Source: Office of the National Economic and Social Development Board, Source: Office of the National Economic and Social Development Board,

Office of the Prime MinisterOffice of the Prime Minister

1996

1997

1998

1996

1997

1998

Agriculture 10.56 10.78 11.83 Manufacturing 31.32 32.15 31.94

Crops 6.30 6.57 7.15 Construction 6.38 4.76 3.24

Livestock 1.04 1.04 1.10Electricity and water

supply 2.66 2.85 3.08

Fisheries 1.60 1.56 1.85Transportation and

communication 8.61 9.15 9.23

Forestry 0.13 0.12 0.11Wholesale and retail

trade 16.04 15.62 14.85

Agricultural services 0.28 0.27 0.30Banking, insurance and

real estate 7.47 6.70 5.65

Simple agricultural processing products 1.22 1.22 1.32 Ownership of dwellings 2.70 2.93 3.41

Mining and quarrying 1.69 1.94 2.03

Public administration and defense 2.59 2.71 3.22

Services 9.98 10.42 11.53

Tourism revenue share of GDP at current Tourism revenue share of GDP at current pricesprices



1996 1997 1998 1999 2000 2001

GDP4,608,49

14,727,31

74,635,92

54,688,37

2 n/a n/a

Agriculture 510,400 541,864 620,182 553,335 n/a n/a

Manufacture

1,298,817

1,349,278

1,354,394

1,452,223 n/a n/a

Construction 343,873 270,012 176,202 161,473 n/a n/a

Service and Other

2,455,401

2,566,163

2,485,147

2,521,341 n/a n/a

Tourism Revenue 219,364 220,755 242,177 253,018

285,272 299,047

Percentage tourism revenue share Percentage tourism revenue share of GDP at current pricesof GDP at current prices



1996 1997 1998 1999

Agriculture 11.08 11.46 13.38 11.80

Manufacture 28.18 28.54 29.22 30.97

Construction 7.46 5.71 3.80 3.44

Service and Other 53.28 54.28 53.61 53.78

Tourism Revenue/GDP 4.76 4.67 5.22 5.40

Tourism Revenue/ GDP of Service

and Other 8.93 8.60 9.7410.0

4

Comparison of revenue from tourism Comparison of revenue from tourism

and other major exports: millions and other major exports: millions

bahtbaht

Source: Ministry of CommerceSource: Ministry of Commerce

1996 1997

Tourism219,36

4 Tourism220,30

3

Computers & parts 167,674 Cars & parts 220,755

Textile products 79,875 Textile products 97,136

Rubber 63,373Computers &

parts 75,838

Integrated circuits 58,539 Rubber 65,093

Precious Stones 54,273 Canned seafood 57,450

Rice 50,735 Rice 55,622

Prawns 43,404 Precious Stones 49,309

Radio, TV and parts 34,627 Prawns 47,184

Canned seafood 34,244Radio, TV and

parts 43,579

Cars & parts 15,829Integrated

circuits 32,761

Comparison of revenue from tourism Comparison of revenue from tourism

and other major exports: millions and other major exports: millions bahtbaht

Source: Ministry of CommerceSource: Ministry of Commerce

1998 1999

Tourism320,52

6 Tourism304,98

2

Integrated circuits 242,177 Rubber 253,018

Textile products 123,133Integrated

circuits 111,767

Cars & parts 93,833 Textile products 110,356

Computers & parts 86,803 Cars & parts 73,812

Canned seafood 67,952Computers &

parts 70,111

Precious Stones 58,343 Canned seafood 65,957

Prawns 58,058 Precious Stones 59,821

Rice 57,350 Prawns 48,348

Radio, TV and parts 55,407 Rice 47,233

Rubber 49,063Radio, TV and

parts 43,942

Percentage of Employed Persons Percentage of Employed Persons by Industry: 1989 – 2000by Industry: 1989 – 2000

Source : Report of the Labor Force Survey : 1989 - 2000, National Statistical Source : Report of the Labor Force Survey : 1989 - 2000, National Statistical OfficeOffice

Year

Non-Agriculture% of Non-Agriculture and Non-Manufacture

(3)+(4)+(5)+(6)+(7)Agriculture (1)

Manufacture (2)

Construction (3)

Commerce (4)

Transport (5)

Services (6)

Others (7)

1989 57 12 4 12 3 11 1 31

1990 64 10 3 10 2 10 1 26

1991 51 14 6 13 3 12 1 35

1992 51 15 7 12 3 12 1 34

1993 49 15 6 13 3 13 1 36

1994 44 16 8 14 3 14 1 40

1995 41 17 9 15 4 14 1 43

1996 40 17 10 15 3 14 1 43

1997 39 17 10 15 4 15 1 44

1998 40 17 7 16 4 16 1 44

1999 42 16 5 16 4 16 1 42

2000 40 17 6 17 3 16 1 43

Average Wages of Employed Persons Average Wages of Employed Persons by Industry for Whole Kingdom: 1989 – 2000 by Industry for Whole Kingdom: 1989 – 2000 (*)(*)

(*)(*) Relative to the base average wage for the total employed person which is 1 Relative to the base average wage for the total employed person which is 1

Source : Report of the Labor Force Survey : 1989 - 2000, National Statistical Source : Report of the Labor Force Survey : 1989 - 2000, National Statistical OfficeOffice

YearAgriculture

(1)

Non-AgricultureAverage

of Ag, Mine, Manu

(1) to (3)

Average of Non-Ag

and Non-Manu

(4) to (9)Mining

(2)Manufacture

(3)Construction

(4)

Electricitysanitary services

(5)Commerce

(6)Transport

(7)Services

(8)Other

(9)

1989 0.54 1.11 0.90 0.93 2.09 1.26 1.54 1.39 1.45 0.85 1.44

1990 0.46 0.97 0.84 0.84 2.35 1.30 1.47 1.38 1.20 0.76 1.42

1991 0.53 - 0.83 0.90 2.70 1.00 1.63 1.48 - 0.45 1.29

1992 0.52 1.00 0.91 0.83 1.85 1.33 1.63 1.41 1.29 0.81 1.39

1993 0.49 0.97 0.86 0.80 2.25 1.31 1.43 1.41 1.17 0.77 1.40

1994 0.51 0.92 0.91 0.72 2.10 1.36 1.48 1.36 1.00 0.78 1.34

1995 0.50 0.91 0.87 0.76 2.05 1.24 1.37 1.44 1.65 0.76 1.42

1996 0.51 0.78 0.92 0.75 1.85 1.32 1.33 1.40 2.68 0.74 1.56

1997 0.53 0.96 0.92 0.72 1.85 1.29 1.51 1.36 0.75 0.80 1.25

1998 0.52 0.97 0.88 0.71 2.20 1.31 1.54 1.29 1.13 0.79 1.36

1999 0.49 0.68 0.89 0.73 2.38 1.18 1.46 1.31 1.40 0.69 1.41

2000 0.47 0.99 0.87 0.72 1.98 1.34 1.68 1.30 1.14 0.78 1.36

Thai Thai Core Core

Environment Environment IndicatorsIndicators

Thai Core Environment Thai Core Environment IndicatorsIndicators

ClimateClimate Natural DisastersNatural Disasters Land and Land UseLand and Land Use ForestForest EnergyEnergy WaterWater Hazardous Waste and WasteHazardous Waste and Waste Water PollutionWater Pollution Air PollutionAir Pollution Noise PollutionNoise Pollution

Land, Land Use and ForestLand, Land Use and Forest

Source: National Statistical Office, Office of the Prime MinisterSource: National Statistical Office, Office of the Prime Minister

1997 1998 1999 2000 2001

Total land (Sq. km.)513,11

5513,11

5513,11

5513,11

5 513,115

Forest land (%) 26.0 25.3 25.3 25.3 33.5

Area of agricultural holding (%) - 34.8 - - -

Others (%) - 39.9 - - -

Forest land (Sq. km.) 131,485 129,722 129,722 129,722 172,050

Percentage of protected area per total land (%) 15.3 15.8 16.9 17.8 -

Proportion of wood production per domestic wood-apparent (%) 2.6 4.7 3.4 3.1 -

WaterWater


1997 1998 1999 2000 2001

Percentage of effective storage capacity per active storage (%) 74.5 61.7 31.5 73.4 81.2

Percentage of raw water use to pipe of water per total (%)

- From surface water (%) 79.0 79.7 79.7 … …

- From subsurface water (%) 7.6 7.0 6.5 … …

Average pipe water consumption (Cu. m/Case/Month)

- The Metropolitan Waterworks Authority 58.8 55.4 51.6 52.2 53.9

- The Provincial Waterworks Authority 25.8 23.8 21.8 21.8 22.6

Hazardous Waste and WasteHazardous Waste and Waste


1997 1998 1999 2000 2001

Total waste (1,000 Tons)13,542.

213,594.

813,825.

813,932.

1 …

In Bangkok (%) 24.1 22.8 23.7 23.9 …

Municipality and Mueang Pattaya (%) 35.1 32.7 32.6 30.9 …

Non - municipality (%) 40.8 44.5 43.7 45.2 …

Total hazardous waste (1,000 Tons) 1,718 1,637 1,600 1,650 1,650

Industrial hazardous waste (%) 81.5 79.7 78.1 78.2 77.6

Domestic hazardous waste (%) 18.5 20.3 21.9 21.8 22.4

Water PollutionWater Pollution

Standard ValueStandard Value

DO = Dissolved Oxygen > 2.0 mg./l.DO = Dissolved Oxygen > 2.0 mg./l.

BOD = Biochemical Oxygen Demand < 4.0 mg./l.BOD = Biochemical Oxygen Demand < 4.0 mg./l.

TCB = Total Coliform Bacteria < 20,000 MPN/100 ml.TCB = Total Coliform Bacteria < 20,000 MPN/100 ml.


1997 1998 1999 2000

Chaophraya River (Lower)

DO (mg./l.) 0.5 1.0 1.8 2.0

BOD (mg./l.) 3.1 2.8 3.3 2.6

TCB (MPN/100ml.)

46,000

14,500

44,156 63,000

Thachin River (Lower)

DO (mg./l.) 1.0 1.3 1.0 1.0

BOD (mg./l.) - 2.0 4.1 4.0

TCB (MPN/100ml.)

24,000 2,400

97,846

100,000

Mae Klong River

DO (mg./l.) 6.0 8.0 6.1 6.2

BOD (mg./l.) 1.3 1.0 1.0 1.1

TCB (MPN/100ml.) 3,200 790 3,838 3,900

Bang Pakong River

DO (mg./l.) 4.3 4.7 4.8 3.9

BOD (mg./l.) 0.9 0.9 1.6 1.7

TCB (MPN/100ml.) 500 195 8,945 6,200

1997 1998 1999 2000

Air PollutionAir Pollution


1997 1998 1999 2000

Emissions per GDP at 1988 prices (Gram/Baht)

Carbon Dioxide (CO2) 51.5 52.3 51.6 49.1

Nitrogen Oxide (NOx) 0.2 0.2 0.2 0.2

Sulfur Dioxide (SO2) 0.5 0.3 0.3 0.2

Air quality on road side in Bangkok (Average)

Total Suspended Particulate Matter

(24 hrs.) (mg./cu. m) - - 0.2 0.2

Suspended Particulate Matter PM-10

(24 hrs.) (microgram/cu. m) - - 80.1 82.6

Carbon monoxide(8 hrs.) (ppm.) - - 2.3 2.2

Ozone (1 hr.) (ppb) - - 6.9 7.6

Sulfur dioxide (24 hrs.) (ppb) - - 8.2 9.2

Thai Thai Tourism Tourism IndustryIndustry

Statistics of Tourism in Thailand Statistics of Tourism in Thailand

Number of Tourists 1996-2002Number of Tourists 1996-2002

Note: Number of tourism excluding overseas Thai. Note: Number of tourism excluding overseas Thai.

Source: The Tourism Authority of ThailandSource: The Tourism Authority of Thailand

Fig-1: Number of Tourists

-

2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

12,000,000

1995 1996 1997 1998 1999 2000 2001 2002 2003

Year

Per

son

Purpose of Visit Thailand (%)Purpose of Visit Thailand (%)1996-20021996-2002



Year

Purpose of Visit (percent, %)

Vacation Business Convention Others

1996

87

10

1

2

1997

87

10

1

2

1998

88

9

1

2

1999

88

9

1

2

2000

88

9

1

2

2001

88

9

1

2

2002

89

8

1

2

Reasons of Visit Thailand Reasons of Visit Thailand in Low Season 2001 (%)in Low Season 2001 (%)

Note: Tourists answer in order and no more than three reasonsNote: Tourists answer in order and no more than three reasons


Reasons to Visit ThailandPercentage

(%)

Cheap and Worth for Money 42.46

Tradition, Art, and Culture 41.32

Shopping 39.46

Beach, Sea, and Island 32.87

Thai Foods 20.14

Accommodation, Good Service

13.72

Nature, and Mountain 10.22

As of Packaged Tour 9.25

Safety 8.69

Sports 2.55

Other 21.15

Occupation of Tourists (%) Occupation of Tourists (%) 1996-20021996-2002



Year

Occupation (percent, %)

Professionals Administrative

managerial Commercial personnel

Laborers, production

Other and not stated

1996 17 12 18

18 36

1997 19 13 17

15 37

1998 22 11 17

15 35

1999 19 11 17

18 35

2000 15 11

17

20 37

2001 15 11

17

19 39

2002 15 11

17

17 40

Tourist Consumption Expenditure Tourist Consumption Expenditure

1996-20021996-2002



Fig-2: Tourist consumption expenditure

219,364 220,754

242,177

253,018

200,000

210,000

220,000

230,000

240,000

250,000

260,000

1 2 3 4

Year (1=1996, 4=1999)

Mil

lio

n B

ah

t

Percentage Share of Percentage Share of Tourist Expenditure 1996-2002Tourist Expenditure 1996-2002



Expenditure 1996 1997 1998 1999

Accommodation 20 25 27 24

Food and beverage 15 15 16 15

Sightseeing 6 6 4 4

Local transport 6 7 7 7

Shopping 38 34 29 35

Entertainment 10 10 11 11

Miscellaneous 5 3 5 4

Average Days of Stay in Thailand Average Days of Stay in Thailand

1996-20021996-2002



Year Average days of

stay

1996 8.23

1997 8.33

1998 8.4

1999 7.96

2000 7.77

2001 7.96

2002 7.98

Quantity of Accommodations Quantity of Accommodations 1997-2001 1997-2001

Accommodations: Hotel, Guest House, Bangalore, Resort, Raft, Accommodations: Hotel, Guest House, Bangalore, Resort, Raft, Apartment, MotelApartment, Motel


Quantity of Accommodations

4762 44544837

5525 5701

0

1000

2000

3000

4000

5000

6000

1 2 3 4 5

Year, 1= 1997, 5 = 2001

Quan

tity

What does What does tourism promotion tourism promotion

mean for mean for welfare and welfare and

environment?environment?

General General

Equilibrium Equilibrium ModelModel

The General Equilibrium Model

NATURE

PARK

LAND

RURAL TOURISM

AGRICULTURE

LABOR

URBAN TOURISM

MANUFACTURING

CAPITAL

RURAL AREA URBAN AREA

POLLUTION

EXPORT OR IMPORT

Summary of NotationSummary of Notation

rr Rural tourism Rural tourism ss Urban tourismUrban tourismaa Agriculture Agriculture mm ManufactureManufacture

xxii Domestic demand Domestic demand for good ifor good i

yyii Domestic supply Domestic supply of good i of good i

ppii Price of good i Price of good i LL Labor endowmentLabor endowmentKK Capital endowmentCapital endowment

ll Land endowment, l =1Land endowment, l =1TT Land used in Land used in

agricultureagriculturenn Natural Park, (n+T=1)Natural Park, (n+T=1)uu Aggregate utility level Aggregate utility level zz Pollution emitted Pollution emitted

from from manufacturing manufacturing tt Pollution taxPollution taxtt TariffTariff

MMii Net import of tradable Net import of tradable good igood i

Summary of FunctionsSummary of Functions

Aggregate Expenditure FunctionAggregate Expenditure Function

Total Revenue FunctionTotal Revenue Function

),,,,,,( uznppppE masr

}|{min uxpxpxpxp mmaassrrx

),,,,,,,( KLnppppG masr },|.{max KLzypypypyp mmaassrr

y

Aggregate Aggregate Expenditure Expenditure

FunctionFunction

Aggregate Expenditure Function Aggregate Expenditure Function (1)(1)

Homogenous of degree one in all Homogenous of degree one in all pricesprices

Concave in prices Concave in prices

Non-decreasing in prices, utility, Non-decreasing in prices, utility, pollution emission, and natural park pollution emission, and natural park

),,,(),,,( uznpEuznpE

0,0 iii ppp EE

0,,, nzup EEEEi

Aggregate Expenditure Aggregate Expenditure Function (2)Function (2)

Shephard’s lemma, the demand for good i Shephard’s lemma, the demand for good i

Output demand is downward sloping Output demand is downward sloping

The shadow price of clean environment, or The shadow price of clean environment, or the marginal willingness for consumer to the marginal willingness for consumer to pay to for clean environmentpay to for clean environment

0 ip xEi

0 iipp pxEii

0zE

Aggregate Expenditure Aggregate Expenditure Function (3)Function (3)

The shadow price of natural park, The shadow price of natural park, or the marginal willingness for or the marginal willingness for consumer to pay to preserve consumer to pay to preserve natural park:natural park:

Utility functionUtility function

0nE

),,( znxuu

0,0,0 znx uuu

Total Total Revenue Revenue FunctionFunction

Total Revenue Function (1)Total Revenue Function (1)

Homogenous of degree one in all Homogenous of degree one in all prices prices

Homogenous of degree one in all Homogenous of degree one in all factor endowments factor endowments

),,,,(),,,,( KLnpGKLnpG

),,,,(),,,,( KLnpGKLnpG


Convex in pricesConvex in prices

Concave in factor endowments Concave in factor endowments

The supply of good iThe supply of good i

0,0 iii ppp GG

KLlvGG vvv ,,,0,0

0 ip yGi


Output supply is upward sloping Output supply is upward sloping

The quantity of pollution emitted The quantity of pollution emitted

0 iipp pyGii

0 Gz

0 Gz


The wage of factor The wage of factor

Factor demand is downward sloping Factor demand is downward sloping

0 vwvG

0 vwG vvv

KLlv ,,

EquilibriuEquilibrium m ConditionsConditions

Equilibrium Conditions (1)Equilibrium Conditions (1)

The economy’s budget constraintThe economy’s budget constraint

total expenditure = total revenue total expenditure = total revenue

[1][1]

),,,,,,( uznppppE masr

),,,,,,,( KLnppppG masr z. i

iiMt

Equilibrium Conditions (2)Equilibrium Conditions (2)

Net import of tradable goods Net import of tradable goods [2] to [5][2] to [5]

Good is imported if Good is imported if

Good is exported if Good is exported if

masri ,,,ii ppi GEM

,0iM

,0iM

0t

0t

Equilibrium Conditions (3)Equilibrium Conditions (3) PollutionPollution

[6][6]

Land marketLand market[7][7]

Inverse world demand for rural Inverse world demand for rural tourism tourism

[8][8]

Inverse world demand for urban Inverse world demand for urban tourism tourism

[9][9]

zG

1Tn

),),(,( znMpMpp ssrrr

),,),(( znMMppp srrss

Welfare Welfare AnalysisAnalysis

Welfare Analysis (1)Welfare Analysis (1)

Exogenous variables Exogenous variables

are given at world market prices are given at world market prices

Endogenous variables Endogenous variables

are set by world demand for rural are set by world demand for rural and and

urban tourism urban tourism

ma ppKL ,,,

masrsr MMMMunpp ,,,,,,,,

ma pp ,

sr pp ,


Total differentiate [1], yieldTotal differentiate [1], yield

Rearrange and using [2] to [6], yieldRearrange and using [2] to [6], yield

[10][10]

duEdzEdnGEdpMdpM uznnssrr )()(

duEdzEdnEdpEdpE uznsprp sr

i

iii

iinsprp dtMdMtzddzdGdnGdpGdpGsr

i

iii

ii dtMdMt

Welfare Analysis (3)Welfare Analysis (3) Total differentiate [8], and rearrange, yieldTotal differentiate [8], and rearrange, yield

[11][11]

[11’][11’]

dzdz

dpdn

dn

dpdM

dM

dp

dp

dpdM

dM

dpdp rr

ss

s

s

rr

r

rr

rr

r

r

r

r

rr p

M

dM

p

M

dM

dpdp r

s

s

r

s

s

r pM

dM

p

M

dM

dp

rr

r pn

dn

p

n

dn

dpr

r

r pz

dz

p

z

dz

dp

zpnpMpMpdp rrrrsrsrrrrr ˆˆˆˆ

znMMp rrssrrrr ˆˆˆˆˆ

Welfare Analysis (4)Welfare Analysis (4) Similarly, total differentiate [9], yield Similarly, total differentiate [9], yield

[12][12]

[12’][12’]

Where, for Where, for Proportional change of tourism pricesProportional change of tourism prices

Proportional change of tourism importProportional change of tourism import

zpnpMpMpdp sssssssrsrss ˆˆˆˆ

znMMp ssssrrss ˆˆˆˆˆ

iii pdpp ˆ

iii MdMM ˆ

sri ,


Own inverse elasticity of world Own inverse elasticity of world demand demand for tourism for tourism

Cross inverse elasticity of world Cross inverse elasticity of world demand for tourism demand for tourism

Inverse elasticity of Natural Inverse elasticity of Natural Park to Park to tourism prices tourism prices

Inverse elasticity of pollution to Inverse elasticity of pollution to tourism prices tourism prices

j

i

i

jij p

M

dM

dp

i

ii p

n

dn

dp

i

ii p

z

dz

dp

srji ,, ji

i

i

i

ii p

M

dM

dp


Substitute [11] and [12] in [10] and rearrange, yieldSubstitute [11] and [12] in [10] and rearrange, yield

[13][13]

uuEu ˆ rssrsrrrrr MMpMpMt ˆ)(

aaa MMt ˆ mmm MMt ˆ

nppnEnG ssrrnn ˆ)(

i

iii tMt ˆ

ssssrrsrss MMpMpMt ˆ)(

zppzEz zzrrz ˆ).(

Policy Policy Implications Implications

Tourism Promotion PolicyTourism Promotion Policy

Tourism Promotion Policy (1)Tourism Promotion Policy (1) I would like to analyze the effects of I would like to analyze the effects of ““tourism tourism

promotion policy”promotion policy” on the social welfare. on the social welfare. The tourism promotion policy indicates the increases The tourism promotion policy indicates the increases

in rural tourism export and/or urban tourism export, in rural tourism export and/or urban tourism export, i.e. i.e.

For simplicity and isolation of the problem, I assume For simplicity and isolation of the problem, I assume that there are no tariffs, i.e. free trade policy in all that there are no tariffs, i.e. free trade policy in all sectors. sectors.

Therefore, the welfare effects equation is reduced to Therefore, the welfare effects equation is reduced to [13A] below:[13A] below:

0ˆ,ˆ sr MM

0it masri ,,,

Tourism Promotion Policy (2)Tourism Promotion Policy (2)

[13A][13A]

ssssrrsr MMpMp ˆ)(

uuEu ˆ rssrsrrr MMpMp ˆ)(

nppnEnG ssrrnn ˆ)(

zppzEz zzrrz ˆ).(

The Sign (1)The Sign (1) If both rural and urban tourism are normal goods with If both rural and urban tourism are normal goods with

inelastic demand, theninelastic demand, then

If both rural and urban tourism are normal goods with If both rural and urban tourism are normal goods with elastic demand, thenelastic demand, then

If rural and urban tourism are substitutes, thenIf rural and urban tourism are substitutes, then

If rural and urban tourism are complements, thenIf rural and urban tourism are complements, then

1,0 sr

1, sr

0, srrs

0, srrs

The Sign (2)The Sign (2) As mentioned before, this is the shadow price of As mentioned before, this is the shadow price of

clean environment (the marginal willingness for clean environment (the marginal willingness for consumer to pay for clean environment)consumer to pay for clean environment)

As mentioned before, this is the shadow price of As mentioned before, this is the shadow price of

natural park (the marginal willingness for natural park (the marginal willingness for consumer to pay to preserve natural park)consumer to pay to preserve natural park)

0zE

0nE

The Sign (3)The Sign (3)

Natural park has a positive externality on rural tourism. If Natural park has a positive externality on rural tourism. If natural park demand is stronger than natural park supply, natural park demand is stronger than natural park supply, then an increase in prices of rural tourism decreases then an increase in prices of rural tourism decreases natural natural park. park.

In addition, if rural and urban tourism are substitutes, then In addition, if rural and urban tourism are substitutes, then

if rural and urban tourism are complements, thenif rural and urban tourism are complements, then

if rural and urban tourism are complements, then if rural and urban tourism are complements, then

0r

0s

0s

The Sign (4)The Sign (4)

If natural park supply is stronger than natural park demand, If natural park supply is stronger than natural park demand, then an increase in prices of rural tourism increases natural then an increase in prices of rural tourism increases natural

parkpark




0r

0s

0s

The Sign (5)The Sign (5) Pollution has a negative externality on urban tourism. If Pollution has a negative externality on urban tourism. If

urban tourism demand is stronger than urban tourism urban tourism demand is stronger than urban tourism supply, then an increase in pollution decreases urban supply, then an increase in pollution decreases urban

tourism demand, and so decreases prices of urban tourism.tourism demand, and so decreases prices of urban tourism.




0s

0r

0r

Example of Example of Policy ImplicationPolicy Implication

Example of Policy Implication (1)Example of Policy Implication (1)

Example 1:Example 1: Fixed agricultural land and natural park policy: Fixed agricultural land and natural park policy: Fixed pollution emission policy: Fixed pollution emission policy: Rural and urban tourism promotion: Rural and urban tourism promotion:

Then:Then:

If rural and urban are complements, then there is a welfare If rural and urban are complements, then there is a welfare improvement. improvement.

If rural and urban are substitutes, then welfare effects are If rural and urban are substitutes, then welfare effects are ambiguous.ambiguous.

nnTT ,zz

uuEu ˆ

,0, sr MM 0ˆ,ˆ sr MM

ssssrrsrrssrsrrr MMpMpMMpMp ˆ)(ˆ)(

Example of Policy Implication (2)Example of Policy Implication (2)Example 2:Example 2: Rural and urban tourism promotion: Rural and urban tourism promotion:

Then:Then:

If rural and urban are complements, and there is a perfect If rural and urban are complements, and there is a perfect property right or tax system on both natural park and property right or tax system on both natural park and pollution so that:pollution so that:

So there is a welfare improvement. And the optimal shadow So there is a welfare improvement. And the optimal shadow price of natural park, and the optimal pollution tax are:price of natural park, and the optimal pollution tax are:

uuEu ˆ


ssssrrsrrssrsrrr MMpMpMMpMp ˆ)(ˆ)( zppzEznppnEnG zzrrzssrrnn ˆ).(ˆ)(

0 ssrrnn ppnEnG 0. zzrrz ppzEz

n

ppnGE ssrrnn

z

ppzE ssrrz

Example of Policy Implication (Example of Policy Implication (33))Example 3:Example 3: Fixed pollution emission policy: Fixed pollution emission policy: Rural and urban tourism promotion: Rural and urban tourism promotion: Increase natural park:Increase natural park:

Then:Then:

If rural and urban are complements, then an increase in If rural and urban are complements, then an increase in natural park ambiguously improve welfare if natural park ambiguously improve welfare if

Note: If people do not care about natural park, , then Note: If people do not care about natural park, , then an increase in natural park ambiguously improve welfare if an increase in natural park ambiguously improve welfare if

zz

uuEu ˆ



0ˆ n

nppnEnG ssrrnn ˆ)(

ssrrnn ppnGnE

0nE

0, sr

Example of Policy Implication (4)Example of Policy Implication (4)Example 4:Example 4: Fixed agricultural land and natural park policy: Fixed agricultural land and natural park policy: Rural and urban tourism promotion: Rural and urban tourism promotion: Decrease pollution:Decrease pollution:Then:Then:

If rural and urban are complements, then a decrease If rural and urban are complements, then a decrease in pollution ambiguously improve welfare if in pollution ambiguously improve welfare if

uuEu ˆ



0ˆ z

nnTT ,

zppzEz zzrrz ˆ).(

zzrrz ppzzE .

Other ResultsOther Results There are many other implication results which There are many other implication results which

could be drawn from the welfare equation [13]. could be drawn from the welfare equation [13]. These results are left for further exercises.These results are left for further exercises.

Further research is also needed in order to Further research is also needed in order to determine the own price and cross price determine the own price and cross price elasticities as well as other elasticities for the elasticities as well as other elasticities for the amenity such as natural park and pollution.amenity such as natural park and pollution.

Thank You For Thank You For Your AttentionYour Attention

Anan Wattanakuljarus AAE-875 Growth, trade and the environment in developing countries.

Documents

land use land

forest land

forest source

tourism revenue gdp

total land

na tourism revenue219

tourism revenuegdp4

current prices source