This article surveys the literature on tourism and economic development, identifying the contribution that tourism can make to development, including foreign currency, income and employment, and the costs that it entails. Single equation and system of equations models for estimating tourism demand are provided, indicating developing countries' potential to benefit from increasing expenditure on tourism but their susceptibility to deterioration in price competitiveness. The main sectors of tourism supply -transportation, tour operators, travel agents and accommodation -are examined and the importance of cross-country integration between firms is highlighted. The article argues that many of the problems associated with the use of environmental resources for tourism stem from market failure, and it considers methods for increasing, sustainably, the returns from them.

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The foot and mouth disease (FMD) outbreak significantly reduced tourism expenditures in the UK, as well as affecting the agricultural sector. This paper quantifies the effects of FMD on tourism, agriculture and all other sectors of the UK economy using a computable general equilibrium (CGE) model of the UK economy. The results show that the FMD outbreak had larger adverse effects on GDP through reductions in tourism expenditures than through other effects. The implication for policy makers is that the roles of tourism-related sectors should be considered in the formulation of agricultural policy.

The price competitiveness of tourism destinations is examined at the national level using the Almost Ideal Demand System model. The extent to which changes in the characteristics of package holidays in destinations contribute to a change in the price of the packages is then examined using hedonic pricing models. The results show that the price sensitivities of tourism demand vary considerably between destinations, so that monitoring relative price competitiveness is important. The characteristics that have significant effects on package prices are identified, assisting policy makers in their choice of which characteristics to enhance with a view to increasing the returns from tourism.

This paper uses a system of equations model to examine tourism demand during periods of destination country transition and integration into the wider international community. The Almost Ideal Demand System model is applied to the UK demand for tourism in the neighbouring destinations, France, Spain and Portugal. Spain and Portugal are interesting cases as, during the period under consideration, they experienced a process of transition from economies with characteristics typical of developing countries, only entering the World Bank's industrialized countries classi®cation in the 1980s. The paper examines the evolution of tourism demand during these countries' transition from`developing' to`developed' status. Consideration of France as a neighbouring destination also allows the behaviour of tourism demand to be compared between relatively rich and poor countries. The results show the extent to which the cross-country behaviour of demand becomes more or less similar over time with respect to changes in expenditure and eVective prices. The expenditure elasticities are greater for Spain than France during the initial period, indicating that tourism can assist countries to`catch-up' with their richer neighbours. However, this outcome is not always the case and may not persist, as Portugal had a low initial expenditure elasticity and Spain's relatively high expenditure elasticity decreased over time. Destinations' sensitivity to changes in their own and competitors' prices can also change over time, as indicated by the increases in the own-and cross-price elasticities for Spain, compared with the decreases for France and Portugal. The cross-price elasticity estimates indicate substitutability between the immediate neighbours, Portugal and Spain, and France and Spain.

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