Urban Welfare: Tourism in Barcelona

The Moynihan Institute of Global Affairs’ Trade, Development and Political Economy Series presents Sharat Ganapati: “Urban Welfare: Tourism in Barcelona”. Co-Authors: Treb Allen, Simon Fuchs, Alberto Graziano, Rocio Madera, and Judit Montoriol-Garriga. Abstract: We develop a simple methodology to estimate the heterogeneous welfare effects of any small shock to residents within a city. The methodology relies only on modest assumptions regarding residents’ choice of where to consume and work and delivers an expression that shows that the welfare elasticity to any small shock can be written as a function of (1) the spatial patterns of consumption and income; and (2) the price and wage effects of the shock. We then apply this methodology to ask the question: Is tourism good for locals? Using detailed spatial data on expenditure and income patterns of residents in Barcelona, we show that plausibly exogenous shifts in tourist expenditure due to compositional differences in their country of origin across time and over space in the city crowds out local expenditure by increasing prices but partially compensates through increases in wages. The incidence of the tourism shock, however, is highly heterogeneous across the city, with inner city residents bearing the largest welfare losses and peripheral residents enjoying the greatest welfare gains.

Sharat Ganapati is an Assistant Professor of International Economics at Georgetown Univeristy (Walsh SFS and Economics by courtesy). He served as a Dartmouth International Economics Fellow from 2017-2018 after completing his Ph.D in economics at Yale University.  Sharat works on a variety of issues at the intersection of international trade, industrial organization, and environmental economics. He is interested in how changes in economic policy or technology can shift geographic patterns of production and alter market behavior. He is a National Bureau of Economic Research (NBER) faculty research fellow and a CESifo research affiliate.