13 Feb 2013

The Tourism Kuznets Curve

The "Environmental Kuznets Curve" is shaped like a hill (or upside-down U) that has wealth on the horizontal axis and environmental quality on the vertical axis. The EKC theory is that poorer people do not pollute so much, medium-income people (e.g., China) pollute more, and that richer people pollute less (e.g., Sweden) because they appreciate the environment and have the money to protect/restore it.

The EKC sounds good in theory, but it seems to be more of a "just so" story that may be used to justify "get rich now, take care of the environment later" policies, but this post is not about that debate.

I want to apply the Kuznets theory to another area: tourism (see figure).

My thought is that people in the least-touristed areas (e.g., Nicaragua) are mostly honest in terms of treating you "like a local" in terms of the prices they charge you in the market, taxis, dinner, etc.

This pleasant experience (you don't need to bargain because you know that's the normal price) goes out the window in places with "medium tourism" (e.g., Bali) where locals decide that tourists are rich enough to pay multiples of the local price. In these situations, tourists either haggle to try to get prices down, get ripped off, or just don't buy non-necessities.

Places with heavy tourism (e.g., Paris) just set "tourist prices" that are higher than normal, but reasonable for the situation (language barrier, rents, etc.) Most tourists end up paying more, but some will wander around looking for the "local scene."

I came up with this theory after going from one low tourist area (Flores) to a medium one (Bali) in Indonesia, and encountering multiple attempts to fleece me in the markets, etc.

The worst -- or most surprising -- was at the gas station, where the attendant "filled" my motorbike with 5.6 liters of fuel and charged me 25,500 IDR ($2.50). Although I should have been suspicious when he gave me 5.000 IDR in change from 30,000, I was too confused by his (not accidental) questions about where we were going etc. to notice the change problem or -- much bigger -- the fact that the fuel tank of the motorbike (just rented that day) only had capacity for 4 liters. Ouch.

Anyone have stories for/against this theory?

Bottom Line: Locals who see tourists are money-machines give their country a reputation for corruption and destroy the trust that would make it possible to develop additional businesses.

Posted at: 13-2-13 2:13 :)


Joel W said...

I've been to Cuba a few times, and at local bars and cafes (away from the hotel) I have been charged more than either the listed price or what I see locals paying. This difference is exacerbated further by travelers like myself only having access to "Convertible Pesos" and locals paying in "Cuban Pesos"; Convertible Pesos being worth quite a bit more than Cuban Pesos.

GoldenTri said...

Critics of the Kuznets Curve theory argue that its U-shape comes not from progression in the development of individual countries, but rather from historical differences between countries.

Unknown said...

Dr David
I was discussing with Prof Gopal Kadekodi, noted Env Economist. He mentioned that Kuznet's curve is mistaken often since the Y axis -inequality in income plotted on X axis - per capita income. Hence the Y axis should have the variability in the variable, and X axis the mean of the variable. Often we miss this crucial point. I agree with Prof Kadekodi on this.
MG Chandrakanth

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