On the dynamics of economic growth, tourism development and environmental sustainability

Abstract

AbstractThis paper introduces a dynamic model of economic growth and tourism when the environmental dimension is included in the decision‐making process of the agents. In this setup, the economy can be represented by a four‐dimensional dynamic system, which admits a set of four‐dimensional optimal trajectory. Using dynamic programming tools, we aim to study the economic behaviour of a touristic economy in which environmental dimension is considered as a system's component. It is shown that there is a unique non‐trivial equilibrium of all variables. The general results of the study indicate that the variable's dynamic relationships are complex and that the growth guided by the tourism development could exist under the presence of pollution as well as the dynamic of natural resources. The main policy implication of the results is that policy makers should control the main system's variables in order to stay in a desirable path.