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 procedureEquilibrium 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 MatrixActivités Produits
(17 postes) (17 postes) Tavail Capital
Activités (17 postes)Production
vendue
Produits (17 postes)Achats
intermédiaires
Consommation des ménages
Dépenses d'invest.
Coûts de transport +
marges
Reversement des
marges
Tavail
Capital
ISF & IR IS
TVA & TIPPTVA & impôts
production
Taxes foncières & pro.
Taxe d'habitati
onTaxes transport
et tabacSubventions Etat
(en négatif)Financements
subventions
Subventions CL (en négatif)
Sub. Continuité Territoriale fret
(en négatif)
Financements subventions
Cotisations sociales
patronales
Transferts publics bruts
Transferts Etat aux CL
SalairesPrestations
socialesPrestations
socialesBénéfices distribués
Rémunération du capital
Surplus RdF Surplus CL Epargne Epargne
Importations
Reversement des impôts nationaux
Reversement des impôts locaux
ExportationsAchats et consommations
publics
Taxes de séjour
Collectivités locales
Ménages
Entreprises
Epargne-Investissement
Valeur ajoutée
Marges commerciales et de
transport
Taxes indirectes locales
Subventions Etat
Subventions CL
RdF
RdM
Etat
EntreprisesEpargne-
Investissement
Facteurs
Taxes directes Etat
Taxes indirectes Etat
Taxes directes locales
Marges commercial
es et de transport
RdF RdM EtatCollectivités
localesMénages
Facteurs Taxes directes
Etat
Taxes indirectes
Etat
Taxes directes locales
Taxes indirectes
locales
Effects of a raise in transport costs 1/3
Aggregate (real terms)
Variation in %
GDP -0.245Private Consumption
-0.384
Investment -1.7Exports +0.25Imports -0.6Indirect Taxes -2.29
The first simulation assumes a 10% increase in the cost of joining Corsica by any means for a person or for a commodity
Effects of a raise in transport costs 2/3Sector Variation in %
Agriculture + 0,047Mining Industries -0,143Food + 0,315Other industries + 0,116Construction -1,069Trade + 0,241Transportation + 0,843
Accomodation andCatering
+ 0,018
Information communication -0,239Banking/insurance -0,004Real estate -0,014Activités spécialisées -0,17Public Sector 0,005Other services -0,196Total -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
Aggregate (real terms) Variation in %GDP -0,38Private Consumption -0,49Investment + 0,43Exports -3,57Imports -1,32Indirect Taxes -2,76
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
Effects of a slow down in tourism 2/3Sector Variation in %Agriculture 0,307Mining Industries -0,299Food 1,735Other industries 1,978Construction 0,413Trade 1,362Transportation -0,065Accomodation andCatering -6,252Information communication 0,274Banking/insurance 0,117Real estate -0,027Activités spécialisées 0,283Public Sector 0,033Other services -0,32Total -0,168
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
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
Then a 10% fall in government spendings is simulated in order to assess the dependency to public support
Effects of a slow down in government spendings 2/3
Sector Variation in %Agriculture +0,57Mining Industries -0,56Food +3,13Other industries +1,797Construction -5,248Trade +2,177Transportation -0,247Accomodation andCatering +0,25Information communication -0,94Banking/insurance +0,01Real estate -0,06Activités spécialisées -0,65Public Sector +0,011Other services -0,89Total -0,27
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 !
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