chapter  7
28 Pages


This chapter examines possible economic explanations for international tourism, based primarily on trade theory. The chapter starts by discussing the traditional theories of comparative advantage of Ricardo and HeckscherOhlin in a context of competitive market structures. These models are essentially supply-driven and focus on resource endowments. From an integrated perspective, however, the role of demand (captured by similarity in tastes as well as by the love for variety) should also be explicitly recognized; more importantly, supply and demand should be jointly examined when product differentiation is important and co-exists with economies of scale and scope in production. The chapter deals with such issues to subsequently emphasize resource deployment, competitive advantage and destination competitiveness at an international level. In this context, Michael Porter’s strategic framework becomes of particular relevance, especially when imperfectly competitive markets are prevailing. The importance of economic integration within a globalized tourism environment is then discussed; among others, the evolution of transnational corporations is assessed using the OLI (Ownership-Location-Internalization) framework. The chapter concludes by discussing international policy issues in tourism. Over the last few years, strategic trade theory has provided a good rationale for active industrial policies to be pursued in the international arena. While valid, this may potentially support the case for protectionism, which may result in lose-lose outcomes when the possibility of retaliation by other states is considered. Therefore, and to avoid beggar-thy-neighbour policies, states should learn how to collaborate and exchange ideas in international fora: on these grounds, the implications of the General Agreement on Trade in Services (GATS) for tourism are analyzed, with the aim of promoting globalization not only for the sake of the rich but primarily for the benefi t of the poor.