AAE-875
Growth, trade and
the environment
in developing countries
Anan
Wattanakuljarus
Contents
1. 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
Thai Economy:
Thai Sectors
Percentage share of GDP at 1988 prices
Agriculture
Crops
Livestock
1996
1997
1998
10.56
10.78
11.83
6.30
6.57
1.04
Fisheries
1.60
Forestry
0.13
1.04
1.56
0.12
1996
1997
1998
Manufacturing
31.32
32.15
31.94
7.15
Construction
6.38
4.76
3.24
1.10
Electricity and water
supply
2.66
2.85
3.08
1.85
Transportation and
communication
8.61
9.15
9.23
0.11
Wholesale and retail
trade
16.04
15.62
14.85
7.47
6.70
5.65
Agricultural services
0.28
0.27
0.30
Banking, insurance and
real estate
Simple agricultural
processing products
1.22
1.22
1.32
Ownership of dwellings
2.70
2.93
3.41
2.03
Public administration and
defense
2.59
2.71
3.22
Services
9.98
10.42
11.53
Mining and
quarrying
1.69
1.94
Source: Office of the National Economic and Social Development Board,
Office of the Prime Minister
Tourism revenue share of GDP at current prices
1996
GDP
Agriculture
Manufacture
Construction
Service and
Other
Tourism
Revenue
1999
2000
2001
4,727,317 4,635,925 4,688,372
n/a
n/a
553,335
n/a
n/a
1,298,817 1,349,278 1,354,394 1,452,223
n/a
n/a
161,473
n/a
n/a
2,455,401 2,566,163 2,485,147 2,521,341
n/a
n/a
253,018 285,272
299,047
4,608,491
510,400
343,873
219,364
1997
541,864
270,012
220,755
1998
620,182
176,202
242,177
Source: Office of the National Economic and Social Development Board,
Office of the Prime Minister
Percentage tourism revenue share
of 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
4.76
4.67
5.22
5.40
8.93
8.60
9.74
10.04
Tourism
Revenue/GDP
Tourism Revenue/
GDP of Service
and Other
Source: Office of the National Economic and Social Development Board,
Office of the Prime Minister
Comparison of revenue from tourism
and other major exports: millions baht
1996
Tourism
Computers & parts
1997
219,364 Tourism
167,674 Cars & parts
220,303
220,755
Textile products
79,875 Textile products
97,136
Rubber
63,373 Computers & 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
34,244 Radio, TV and parts
43,579
Cars & parts
15,829 Integrated circuits
32,761
Source: Ministry of Commerce
Comparison of revenue from tourism
and other major exports: millions baht
1998
Tourism
1999
320,526 Tourism
304,982
Integrated circuits
242,177 Rubber
253,018
Textile products
123,133 Integrated circuits
111,767
Cars & parts
93,833 Textile products
110,356
Computers & parts
86,803 Cars & parts
73,812
Canned seafood
67,952 Computers & 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
49,063 Radio, TV and parts
43,942
Source: Ministry of Commerce
Percentage of Employed Persons
by Industry: 1989 – 2000
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
Year
Source : Report of the Labor Force Survey : 1989 - 2000, National Statistical Office
Average Wages of Employed Persons
by Industry for Whole Kingdom: 1989 – 2000
(*)
Non-Agriculture
Average
of Ag,
Mine,
Manu
Average of
Non-Ag
and
Non-Manu
(1) to (3)
(4) to (9)
Agriculture
(1)
Mining
(2)
Manufacture
(3)
Construction
(4)
Electricity
sanitary
services
(5)
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
Year
Commerce
(6)
Transport
(7)
Services
(8)
Other
(9)
(*) 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 Office
Thai
Core
Environment
Indicators
Thai Core Environment Indicators


Climate
Natural Disasters

Land and Land Use
Forest

Energy


Water
Hazardous Waste and Waste
Water Pollution
Air Pollution

Noise Pollution



Land, Land Use and Forest
1997
1998
1999
2000
2001
513,115
513,115
513,115
513,115
26.0
25.3
25.3
25.3
33.5
Area of agricultural holding (%)
-
34.8
-
-
-
Others (%)
-
39.9
-
-
-
131,485
129,722
129,722
129,722
15.3
15.8
16.9
17.8
-
2.6
4.7
3.4
3.1
-
Total land (Sq. km.) 513,115
Forest land (%)
Forest land (Sq. km.)
Percentage of protected area per
total land (%)
Proportion of wood production per
domestic wood-apparent (%)
Source:
National Statistical Office, Office of the Prime Minister
172,050
Water
1997
1998
1999
2000
2001
74.5
61.7
31.5
73.4
81.2
79.0
79.7
79.7
…
…
7.6
7.0
6.5
…
…
- 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
Percentage of effective storage capacity
per active storage (%)
Percentage of raw water use to pipe of
water per total (%)
- From surface water (%)
- From subsurface water (%)
Average pipe water consumption
(Cu. m/Case/Month)
Source:
National Statistical Office, Office of the Prime Minister
Hazardous Waste and Waste
1997
1998
1999
2000
Total waste (1,000 Tons) 13,542.2 13,594.8 13,825.8 13,932.1
2001
…
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
…
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
Total hazardous waste
(1,000 Tons)
Source:
National Statistical Office, Office of the Prime Minister
Water Pollution
1997
1998
1999
2000
1997
1998
1999
2000
Mae Klong
River
Chaophraya
River (Lower)
DO (mg./l.)
0.5
1.0
1.8
2.0
DO (mg./l.)
6.0
8.0
6.1
6.2
BOD (mg./l.)
3.1
2.8
3.3
2.6
BOD (mg./l.)
1.3
1.0
1.0
1.1
46,000
14,500
44,156
63,000
3,200
790
3,838
3,900
TCB
(MPN/100ml.)
TCB
(MPN/100ml.)
Bang Pakong
River
Thachin River
(Lower)
DO (mg./l.)
1.0
1.3
1.0
1.0
DO (mg./l.)
4.3
4.7
4.8
3.9
BOD (mg./l.)
-
2.0
4.1
4.0
BOD (mg./l.)
0.9
0.9
1.6
1.7
TCB
(MPN/100ml.)
500
195
8,945
6,200
TCB
(MPN/100ml.)
24,000
2,400
97,846
100,000
Standard Value
DO = Dissolved Oxygen > 2.0 mg./l.
BOD = Biochemical Oxygen Demand < 4.0 mg./l.
TCB = Total Coliform Bacteria < 20,000 MPN/100 ml.
Source:
National Statistical Office, Office of the Prime Minister
Air Pollution
1997
1998
1999
2000
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
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
Emissions per GDP
at 1988 prices (Gram/Baht)
Air quality on road side in
Bangkok (Average)
Source:
National Statistical Office, Office of the Prime Minister
Thai
Tourism
Industry
Statistics of Tourism in Thailand
Number of Tourists 1996-2002
Fig-1: Number of Tourists
12,000,000
Person
10,000,000
8,000,000
6,000,000
4,000,000
2,000,000
1995
1996
1997
1998
1999
2000
2001
Year
Note: Number of tourism excluding overseas Thai.
Source: The Tourism Authority of Thailand
2002
2003
Purpose of Visit Thailand (%)
1996-2002
Purpose of Visit (percent, %)
Year
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
Note: Number of tourism excluding overseas Thai.
Source: The Tourism Authority of Thailand
Reasons of Visit Thailand
in Low Season 2001 (%)
Reasons to Visit Thailand
Percentage (%)
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
Note:
Tourists answer in order and no more than three reasons
Source: The Tourism Authority of Thailand
Occupation of Tourists (%)
1996-2002
Occupation (percent, %)
Year
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
Note: Number of tourism excluding overseas Thai.
Source: The Tourism Authority of Thailand
Tourist Consumption Expenditure
1996-2002
Fig-2: Tourist consumption expenditure
260,000
253,018
Million Baht
250,000
242,177
240,000
230,000
219,364
220,754
1
2
220,000
210,000
200,000
3
Year (1=1996, 4=1999)
Note: Number of tourism excluding overseas Thai.
Source: The Tourism Authority of Thailand
4
Percentage Share of
Tourist 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
Note: Number of tourism excluding overseas Thai.
Source: The Tourism Authority of Thailand
Average Days of Stay in Thailand
1996-2002
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
Note: Number of tourism excluding overseas Thai.
Source: The Tourism Authority of Thailand
Quantity of Accommodations
1997-2001
Quantity of Accommodations
6000
Quantity
5000
4762
4454
5525
5701
4
5
4837
4000
3000
2000
1000
0
1
2
3
Year, 1= 1997, 5 = 2001
Accommodations: Hotel, Guest House, Bangalore, Resort, Raft, Apartment, Motel
Source: The Tourism Authority of Thailand
What does
tourism promotion
mean for
welfare and
environment?
General
Equilibrium
Model
The General Equilibrium Model
EXPORT OR IMPORT
RURAL
TOURISM
URBAN
TOURISM
PARK
NATURE
LABOR
LAND
POLLUTION
AGRICULTURE
RURAL AREA
CAPITAL
MANUFACTURING
URBAN AREA
Summary of Notation
r
s
a
m
xi
yi
pi
L
K
Rural tourism
Urban tourism
Agriculture
Manufacture
Domestic demand
for good i
Domestic supply
of good i
Price of good i
Labor endowment
Capital endowment
l
T
n
u
z
t
t
Mi
Land endowment, l =1
Land used in
agriculture
Natural Park, (n+T=1)
Aggregate utility level
Pollution emitted
from
manufacturing
Pollution tax
Tariff
Net import of tradable
good i
Summary of Functions

Aggregate Expenditure Function
E ( pr , ps , pa , pm , n, z, u ) 
min { pr xr  ps xs  pa xa  pm xm | u}
x

Total Revenue Function
G( pr , ps , pa , pm , n, , L, K ) 
max{ pr yr  ps ys  pa ya  pm ym   .z | L, K}
y
Aggregate
Expenditure
Function
Aggregate Expenditure Function (1)

Homogenous of degree one in all prices
E ( p, n, z , u )  E ( p, n, z , u )

Concave in prices
E pi  0, E pi pi  0

Non-decreasing in prices, utility,
pollution emission, and natural park
E pi , E u , E z , E n  0
Aggregate Expenditure Function (2)

Shephard’s lemma, the demand for good i
E pi  x i  0

Output demand is downward sloping
E pi pi  xi pi  0

The shadow price of clean environment, or the
marginal willingness for consumer to pay to for
clean environment
Ez  0
Aggregate Expenditure Function (3)

The shadow price of natural park, or
the marginal willingness for consumer
to pay to preserve natural park:
En  0

Utility function
u  u ( x, n, z )
u x  0, u n  0, u z  0
Total
Revenue
Function
Total Revenue Function (1)

Homogenous of degree one in all prices
G ( p, n, , L, K )  G ( p, n, , L, K )

Homogenous of degree one in all factor
endowments
G ( p, n, , L, K )  G ( p, n, , L, K )
Total Revenue Function (2)

Convex in prices
G pi  0, G pi pi  0

Concave in factor endowments
Gv  0, Gvv  0, v  l , L, K

The supply of good i
G pi  yi  0
Total Revenue Function (3)

Output supply is upward sloping
G pi pi  yi pi  0

The quantity of pollution emitted
z  G  0
z   G  0
Total Revenue Function (4)

The wage of factor
G v  wv  0

v  l , L, K
Factor demand is downward sloping
Gvv  wv v  0
Equilibrium
Conditions
Equilibrium Conditions (1)

The economy’s budget constraint
total expenditure = total revenue
E ( pr , p s , pa , pm , n, z, u ) 
G( pr , p s , pa , pm , n, , L, K )   .z 
t M
i
i
i
[1]
Equilibrium Conditions (2)

Net import of tradable goods
M i  E pi  G pi
i  r , s , a, m

Good is imported if
M i  0,

Good is exported if
M i  0,
t 0
t 0
[2] to [5]
Equilibrium Conditions (3)



Pollution
Land market
 G  z
[6]
n T  1
[7]
Inverse world demand for rural tourism
p r  p r ( M r , p s ( M s ), n, z )

[8]
Inverse world demand for urban tourism
p s  p s ( pr ( M r ), M s , n, z )
[9]
Welfare
Analysis
Welfare Analysis (1)

Exogenous variables
L, K , pa , pm



p a , p m are given at world market prices
Endogenous variables
pr , ps , n, , u, M r , M s , M a , M m
pr , ps
are set by world demand for rural and
urban tourism
Welfare Analysis (2)
Total differentiate [1], yield

E pr dp r  E ps dp s  E n dn  E z dz  Eu du 
G p r dpr  G p s dps  Gn dn  G d  dz  zd   ti dM i   M i dti
i
i
Rearrange and using [2] to [6], yield

M r dpr  M s dps  ( En  Gn )dn  ( Ez   )dz  Eu du 
 t dM   M dt
i
i
i
i
i
i
[10]
Welfare Analysis (3)

Total differentiate [8], and rearrange, yield
dpr
dpr dp s
dpr
dpr
dpr 
dM r 
dM s 
dn 
dz
dM r
dp s dM s
dn
dz
dpr M r dM r
dp r M s dM s
dpr 
pr 
pr 
dM r pr M r
dM s p r M s
dpr n dn
pr 
dn pr n
dpr z dz
pr
dz pr z
dpr   r pr Mˆ r   sr pr Mˆ s   r pr nˆ   r pr zˆ
pˆ r   r Mˆ r   sr Mˆ s   r nˆ   r zˆ
[11]
[11’]
Welfare Analysis (4)

Similarly, total differentiate [9], yield
dps   rs ps Mˆ r   s ps Mˆ s   s ps nˆ   s ps zˆ
pˆ s   rs Mˆ r   s Mˆ s   s nˆ   s zˆ

Where, for
[12]
[12’]
i  r, s
pˆ i  dpi pi
Proportional change of tourism prices
Mˆ i  dM i M i
Proportional change of tourism import
Welfare Analysis (5)
dpi M i
i 
dM i pi
Own inverse elasticity of world demand
for tourism
dp j M i
 ij 
dM i p j
i, jof world
r, s i  j
Cross inverse elasticity
demand for tourism
dpi n
i 
dn pi
Inverse elasticity of Natural Park to
tourism prices
i 
dpi z
dz pi
Inverse elasticity of pollution to
tourism prices
Welfare Analysis (6)

Substitute [11] and [12] in [10] and rearrange, yield
Euuuˆ  (tr M r   r pr M r   rs ps M s )Mˆ r 
(ts M s   sr pr M r   s ps M s )Mˆ s 
ta M a Mˆ a  tm M m Mˆ m 
(nGn  nEn r pr  s ps )nˆ 
( .z  zEz  r pr   z pz ) zˆ 
 t M tˆ
i
i
i i
[13]
Policy
Implications
Tourism Promotion Policy
Tourism Promotion Policy (1)

I would like to analyze the effects of “tourism promotion
policy” on the social welfare.

The tourism promotion policy indicates the increases in
rural tourism export and/or urban tourism export, i.e.
Mˆ r , Mˆ s  0

For simplicity and isolation of the problem, I assume that
there are no tariffs, i.e. free trade policy in all sectors.
ti  0 i  r , s, a, m

Therefore, the welfare effects equation is reduced to
[13A] below:
Tourism Promotion Policy (2)
Eu uuˆ  ( r pr M r   rs ps M s )Mˆ r 
( sr pr M r   s ps M s )Mˆ s 
(nGn  nEn r pr  s ps )nˆ 
( .z  zEz  r pr   z pz ) zˆ
[13A]
The Sign (1)

If both rural and urban tourism are normal goods with
inelastic demand, then
0   r ,  s  1

If both rural and urban tourism are normal goods with
elastic demand, then
 r ,  s  1

If rural and urban tourism are substitutes, then
 rs ,  sr  0

If rural and urban tourism are complements, then
 rs ,  sr  0
The Sign (2)

As mentioned before, this is the shadow price of clean
environment (the marginal willingness for consumer to
pay for clean environment)
Ez  0

As mentioned before, this is the shadow price of natural
park (the marginal willingness for consumer to pay to
preserve natural park)
En  0
The Sign (3)
Natural park has a positive externality on rural tourism. If natural
park demand is stronger than natural park supply, then an increase
in prices of rural tourism decreases natural park.
r  0
In addition, if rural and urban tourism are substitutes, then if rural
and urban tourism are complements, then
s  0
if rural and urban tourism are complements, then
s  0
The Sign (4)
If natural park supply is stronger than natural park demand, then
an increase in prices of rural tourism increases natural park
r  0
In addition, if rural and urban tourism are substitutes, then if rural
and urban tourism are complements, then
s  0
if rural and urban tourism are complements, then
s  0
The Sign (5)
Pollution has a negative externality on urban tourism. If urban
tourism demand is stronger than urban tourism supply, then an
increase in pollution decreases urban tourism demand, and so
decreases prices of urban tourism.
s  0
In addition, if rural and urban tourism are substitutes, then if rural
and urban tourism are complements, then
r  0
if rural and urban tourism are complements, then
r  0
Example of
Policy Implication
Example of Policy Implication (1)
Example 1:
T  T,n  n
 Fixed agricultural land and natural park policy:
zz
 Fixed pollution emission policy:
 Rural and urban tourism promotion: M , M  0,
Mˆ r , Mˆ s  0
r
s
Then:
Eu uuˆ  ( r pr M r   rs ps M s )Mˆ r  ( sr pr M r   s ps M s )Mˆ s


If rural and urban are complements, then there is a welfare
improvement.
If rural and urban are substitutes, then welfare effects are
ambiguous.
Example of Policy Implication (2)
Example 2:
 Rural and urban tourism promotion: M r , M s  0,
Then:
Mˆ r , Mˆ s  0
Eu uuˆ  ( r pr M r   rs ps M s )Mˆ r  ( sr pr M r   s ps M s )Mˆ s 
(nGn  nEn   r pr   s p s )nˆ  ( .z  zE z   r pr   z p z ) zˆ

If rural and urban are complements, and there is a perfect property
right or tax system on both natural park and pollution so that:
nGn  nEn   r pr   s p s  0

 .z  zE z   r pr   z p z  0
So there is a welfare improvement. And the optimal shadow price of
natural park, and the optimal pollution tax are:
nGn   r pr   s p s
En 
n
zE z   r pr   s p s

z
Example of Policy Implication (3)
Example 3:
zz
 Fixed pollution emission policy:
 Rural and urban tourism promotion: M r , M s  0,
 Increase natural park:
nˆ  0
Then:
ˆ
Mˆ r , Mˆ s  0
Eu uuˆ  ( r pr M r   rs ps M s )M r  ( sr pr M r   s ps M s )Mˆ s 
(nGn  nEn   r pr   s p s )nˆ

If rural and urban are complements, then an increase in natural
park ambiguously improve welfare if
nEn  nGn   r pr   s p s

Note: If people do not care about natural park, E n  0 , then an
increase in natural park ambiguously improve welfare if
 r , s  0
Example of Policy Implication (4)
Example 4:
 Fixed agricultural land and natural park policy: T  T , n  n
ˆ , Mˆ  0
 Rural and urban tourism promotion: M , M  0, M
r
s
r
s
 Decrease pollution: z
ˆ0
Then:
Eu uuˆ  ( r pr M r   rs ps M s )Mˆ r  ( sr pr M r   s ps M s )Mˆ s 
( .z  zE z   r pr   z p z ) zˆ

If rural and urban are complements, then a decrease in
pollution ambiguously improve welfare if
zE z   .z   r pr   z p z
Other Results


There are many other implication results which could be
drawn from the welfare equation [13]. These results are
left for further exercises.
Further research is also needed in order to determine
the own price and cross price elasticities as well as other
elasticities for the amenity such as natural park and
pollution.
Thank You For
Your Attention