Purpose – This chapter shows that in the presence of tourism, the traditional policy prescription, free trade in goods and the standard Pigouvian tax on pollution, is not optimal for a small open economy. Methodology/approach – The general-equilibrium analysis is employed to study...

Purpose – This chapter investigates the role of infrastructure aid to developing countries for determining the effect on national income and consumer welfare. The chapter further demonstrates the conditions for the Dutch disease effect by decomposing the output effects of infrastructure aid...