Dutch Disease in Tourism Economies: Evidence from the Balearics and the Canary Islands

Abstract

Considerable attention has been given in the economic literature to Dutch disease, with symptoms of the disease being extensively described in many different contexts. Dutch disease is a condition which describes the reaction of an economy, subject to rapid change, on finding new export uses for natural resources. None of the studies, however, has focused on the tourist industry as a source of increased wealth through the exploitation of natural resources, such as beaches or natural areas, using typical mass models of tourism development. By examining two different Spanish regions, this paper provides evidence that the Balearics and the Canary Islands, whose economies are heavily orientated towards tourism, both show signs of Dutch disease and that, as a result, their economic growth might be compromised in coming years.