Abstract

The issue of whether globalization is beneficial remains controversial, particularly because globalization policies are often examined without consideration of their interactions with key sectors of the economy, notably tourism. This paper uses a computable general equilibrium model of the Indonesian economy to examine the effects of globalization via tariff reductions, as a stand-alone policy and in conjunction with tourism growth. The results show that tourism growth amplifies the positive effects of globalization and lessens its adverse effects. Production increases and welfare improves, while adverse effects on government deficits and the trade balance are reduced.