The Promise and Perils of Tourism-Led Growth

Lucio Baccaro, Reto Bürgisser (University of Vienna), Donato Di Carlo (LSE)

Tourism-led growth is an increasingly prevalent growth model, especially in small regions and, in some cases, entire national economies. Centered on providing services to non-resident consumers, it functions as a form of export-led growth, yet with distinctive dynamics. Unlike traditional export models linked to price moderation or deflation, tourism often drives inflation, especially in real estate, raising living costs and reshaping local economies. These pressures can displace residents, weaken manufacturing and other tradable sectors, and generate precarious, low-productivity employment. Benefits largely accrue to property owners, tourism entrepreneurs, and ancillary service providers, while wage earners in non-tourism industries face higher costs without proportional gains. This uneven distribution fosters social and generational tensions, exemplified by rising opposition to “overtourism.” This research examines the political economy of tourism-led growth through growth model theory, focusing on the coalitions that sustain or resist it. Particular attention is given to the role of “diffuse hospitality” platforms such as airbnb in broadening support for tourism expansion. Based on surveys and fieldwork in Italian cities and regions, with comparative analysis planned for Spain, Portugal, and Greece, the study evaluates the sustainability and distributive consequences of tourism-driven development.