Tourism in an Open System: What do Theories of International Trade and Competition Teach Us?

Tourism is a critical determinant of international trade and GDP. Openness affects tourism by allowing (especially small) countries to achieve sufficient economies of scale and scope. Thus, clarifying the relationship between tourism and factors of international demand and supply is essential to improved understanding of international trade and economic growth. This chapter reviews the main theories of international trade from tourism's perspective, focusing in particular on supply-side (comparative costs, factors endowments, new trade theory, endogenous comparative advantage) and demand-side (demand-driven trade) theories. The chapter also stresses their theoretical predictions and empirical validations in static and dynamic settings, discussing the determinants of international tourism and its implications on economic growth, and the relationship between the tourism-growth nexus and natural amenities.