Download Tourism shocks, vulnerabilities and resilience in a small island

Tourism shocks,
vulnerabilities and resilience
in a small island economy :
the case of Corsica
Marie-Antoinette Maupertuis & Sauveur Giannoni,
Université de Corse, UMR CNRS 6240 LISA
International Symposium Tourism specialization and vulnerability, 4-6 December 2014 La Réunion
Introduction
• Corsica is a small island of the Mediterranean with less than 400 000
inhabitants
• Each year Corsica hosts more than 3 millions tourists (3.2 in 2013)
• Tourism accounts for 14% of the value-added, 25% of the exports and is the
first private sector industry of the regional economy
• 75% of the tourism arrivals are related to inbound tourism
Introduction
• Corsica, as often for islands, exhibits numerous vulnerabilities due to small
size, transport costs, exposure to external shocks, etc.
• For instance, in July 2014, the marine transport has been suspended for 3
weeks due to a strike of the employees of the biggest shipping company
• Consequences: fall in tourism demand, no freight, emergence of a de facto
monopoly situation of the other shipping company and important social
impacts
• This kind of problems are rather frequent and a theoritical analysis needs to
be implemented in order to support adequate economic policy making.
Introduction
• In this paper, two hypothesis are formulated:
1. A structural vulnerability of Corsica due to both failures in the external
transport system and to the dependance to tourism sector exists
2. Public spendings seem to be the source of some kind of resilience capacity
• In order to test these hypothesis, two strands of literature are mobilized:
Systemic analysis (Holling,1973 , Le Moigne 1977, Galopin 2006, Walker 2004)
Computable General Equilibrium Modeling applied to Corsica
What about vulnerability of SIE ?
In a systemic perspective, vulnerability is an internal property of a system due
to exposure to its environment (Walker, 2004, Gallopin, 2006).
For instance in economy, when the trade openness or dependance increase,
the system is more vulnerable ceteris paribus
The literature retains various sources of vulnerability for SIE following the
seminal work of L. Briguglio (1995)
The UN Vulnerability Index covers 7 dimensions : size, distance to international
markets, sectoral concentration of exports, share of agriculture/fishing in PNB,
etc.
Recently Goavec and Hoarau (2012) differenciated external shocs (natural vs
commercial) and exposure (size, distance to market, economic specialization)
And resilience ?
From Holling (1973), the concept has been well diffused but it is very confused
Two kinds of resilience are identified for social systems (Walkers, 2004) :
1.
Resilience as absorbtive capacity : the system resists and some internal
mechanisms play as perturbations absorbers (resistance ?)
2. Resilience as adaptative capacity (Gallopin, 2006) : the system adjusts to the
perturbation
Small attention has been devoted to the application to SIE.
Briguglio and al. (2006) built a resilience index covering macroeconmic stability,
market efficiency, good governance and environmental and social conditions.
Our question
Is it possible for a SIE such as Corsica specialized in tourism and exposed to
various external perturbations (transport strike, fall in tourism demand) to be
resilient ?
And, if it exists, which kind of resilience would it be ?
The structure of Corsica’ value-added (2009)
The computable general equilibrium model of
Corsica
• The model for Corsica is an adaptation of the standard IFPRI Model
• The model is static
• The SAM (reference year 2009) includes 15 sectors
• The SAM has been built in order to integrate two specific sectors : transport
and tourism (accomodation and catering)
• Institutions include both government and local collectivities
Closure procedure
Equilibrium
Closure procedure
S-I
The level of savings determines the level of
investment.
Payment Balance
Flexible exchange rates and fixed foreign savings
Public finances (local and government)
Flexible savings and fixed direct tax rate.
The Social Accounting Matrix
Activités
Produits
(17 postes)
(17 postes)
Tavail
Capital
Tavail
Capital
Taxes
directes
Etat
Taxes
indirectes
Etat
Taxes
directes
locales
Taxes
indirectes
locales
Achats
intermédiaires
Marges
commerciales et de
transport
Facteurs
Facteurs
RdF
RdM
Etat
Collectivités
locales
Exportations
Coûts de
transport +
marges
Achats et consommations
publics
Consomm
ation des
ménages
Valeur ajoutée
ISF & IR
Taxes indirectes Etat
Taxe
d'habitati
on
Taxes foncières &
pro.
Taxes transport
et tabac
Subventions Etat
Subventions Etat
(en négatif)
Subventions CL
Subventions CL
(en négatif)
RdF
Cotisations
sociales
patronales
IS
TVA & impôts
production
TVA & TIPP
Taxes indirectes
locales
Taxes de séjour
Financements
subventions
Sub. Continuité
Territoriale fret
(en négatif)
Financements
subventions
Reversement des impôts
nationaux
RdM
Etat
Importations
Transferts
publics bruts
Reversement des
impôts locaux
Collectivités locales
Ménages
Entreprises
EpargneInvestissement
EpargneInvestissement
Dépenses
d'invest.
Reversemen
t des
marges
Taxes directes Etat
Taxes directes
locales
Ménages Entreprises
Production
vendue
Activités (17 postes)
Produits (17 postes)
Marges
commercial
es et de
transport
Transferts
Etat aux CL
Prestations
sociales
Salaires
Prestations
sociales
Bénéfices
distribués
Rémunéra
tion du
capital
Surplus RdF
Surplus CL
Epargne
Epargne
Effects of a raise in transport costs 1/3
The first simulation assumes a 10% increase in the cost of joining
Corsica by any means for a person or for a commodity
Aggregate (real terms)
GDP
Private Consumption
Investment
Exports
Imports
Indirect Taxes
Variation in %
-0.245
-0.384
-1.7
+0.25
-0.6
-2.29
Effects of a raise in transport costs 2/3
Sector
Agriculture
Mining Industries
Food
Other industries
Construction
Trade
Transportation
Variation in %
+ 0,047
-0,143
+ 0,315
+ 0,116
-1,069
+ 0,241
+ 0,843
Accomodation and
Catering
Information communication
Banking/insurance
Real estate
Activités spécialisées
Public Sector
Other services
Total
+ 0,018
-0,239
-0,004
-0,014
-0,17
0,005
-0,196
-0,058
Effects of a raise in transport costs 3/3
• There is a clear negative effect on the activity of sectors such as
construction that are heavily dependant on imported inputs
• Some sectors such as food production experience positive effects. The point
is that these sectors use local inputs that are less expensive,
• There is an intersectoral transfer of resources
• The paradox is that the total value-added declines a bit but the local
foundations of the productive system are in some ways strenghtened
Effects of a slow down in tourism 1/3
A 20% fall in accomodation and catering demand is then simulated in
order to test the effect of a shock similar to the one occured in July 2014
Aggregate (real terms)
GDP
Private Consumption
Investment
Exports
Imports
Indirect Taxes
Variation in %
-0,38
-0,49
+ 0,43
-3,57
-1,32
-2,76
Effects of a slow down in tourism 2/3
Sector
Agriculture
Mining Industries
Food
Other industries
Construction
Trade
Transportation
Accomodation and
Catering
Information communication
Banking/insurance
Real estate
Activités spécialisées
Public Sector
Other services
Variation in %
0,307
-0,299
1,735
1,978
0,413
1,362
-0,065
-6,252
0,274
0,117
-0,027
0,283
0,033
-0,32
Effects of a slow down in tourism 3/3
• The external trade balance is direcly impacted as an evidence by the fall in
exports and by the fall in imports due the diminution of tourism receipts
• An interesting issue is a significative positive effect on investment that in
our view reflects part of the cost of adaptation to the shock
• As before, the total value-added is expieriencing a limited decline
• A most important issue is that even if sectors related to tourism as the
transport sector are negatively affected, again the food sector, agriculture
and trade sector counterbalance the negative effects of the tourism shock
Effects of a slow down in government spendings 1/3
Then a 10% fall in government spendings is simulated in order to assess the
dependency to public support
Aggregate (real terms)
Variation in %
GDP
-0,415
Private Consumption
-1,5
Investment
-8,18
Exports
+2.65
Imports
-2,96
Indirect Taxes
-2,02
Effects of a slow down in government spendings 2/3
Sector
Agriculture
Mining Industries
Food
Other industries
Construction
Trade
Transportation
Accomodation and
Catering
Information communication
Banking/insurance
Real estate
Activités spécialisées
Public Sector
Other services
Variation in %
+0,57
-0,56
+3,13
+1,797
-5,248
+2,177
-0,247
+0,25
-0,94
+0,01
-0,06
-0,65
+0,011
-0,89
Effects of a slow down in government spendings 3/3
• The
dependance to government spendings is real : the value-added
experiences an important decline
• Compensation mechanisms still exist but seem to be less effective
• An illustration of this strong dependance to government spendings is the
negative effect of the cut in public tranfers on the construction sector
• As predicted by Vellutini (2004), this illustrates some kind of Dutch disease
related to public spendings
Conclusion
In the short run, the effects of a shock on transport costs and on tourism
demand are globally negative
But the economy seems to be able to absorb these shocks through :
1.
A mechanism of transfer between sectors : regional-based sectors are
expending
2. A mechanism of government-led absorption of the shock
Resilience of the Corsican economy to external shocks seems to be in fact the
result of a publically supported resistance mechanism
Limits
• Our approach lacks an underlying theoritical model in order to explain the
adjustment mechanism of the economy: what is the path toward resilience?
• Some more empirical research has to be done in order to improve the
estimation of specific elasticities
Thank you for your attention !