Sun, Sand, and Services: Tourism and Household Welfare in Jamaica
Abstract
Tourism services have seen marked growth over the last two decades. Many countries have also incorporated tourism specialization into their national development plans. Despite it's importance, there is still a significant amount that remains unanswered about the ability of tourism to generate improvements in welfare for a local population. There is also uncertainty about the degree to which gains from tourism are able to benefit households across the income distribution. I contribute to the literature by answering this question in the context of Jamaica, an emerging economy that has made tourism a major component of its national development strategy, but that has also experienced mixed economic outcomes over the past 2 decades. I contribute to the literature by employing two unique and powerful sources of data. First, I use a rich cross-section of Jamaican household expenditure data spanning the period between 2000 and 2021. Second, I use a dataset of granular tourist spending data from the Jamaican Ministry of Tourism covering the same period. Combining these, I use a shift-share instrumental variable estimation strategy to identify the effects of changes in tourism intensity in a municipality on real per capita consumption by local households. After accounting for cost-of-living differences between different areas of Jamaica, I find that an increase in tourist accommodation spending of 10 million US dollars yields a roughly 1\% increase in real per-capita household expenditures for urban households outside of the capital Kingston. I find that these increases in expenditure occur across areas of food and nonfood consumption, along with healthcare and loan repayments. These increases are concentrated in medium-skilled occupations in non-tourism service sector and manufacturing industries, and for households roughly in the middle of the expenditure distribution. Overall, I find that tourism produces broad gains across income/expenditure but that there appear to be limited gains for workers within the tourism industry itself, consistent with low productivity growth and constant returns to scale production in labor.Current Draft (9/24/2025): Sun, Sand, and Services: Tourism and Household Welfare in Jamaica
Slides (9/24/2025): Job Market Paper: Slides