The impact of tourism on the economy and population of small islands : The case of Aruba

Abstract

Many small islands in the Caribbean depend on tourism as the dominant sector of their economy. This dependence leads to economic vulnerability, in particular if the sector is dominated by international hotel chains that cater for the North American market. Reliance on a single geographical market implies seasonality in the tourist arrivals linked to the holiday season in the home country, causing seasonal labour demand on the island. It also implies that economic downturns in the home country decrease tourist spending on the island. International chains import many inputs, causing leakages from the local economy. A successful tourist development generates pent-up demand in the labour market, causing labour migration to the island. The chain migration related to this labour migration adds to the population pressure on the island. This study analyses these issues for Aruba. The tourist industry on this island has developed very rapidly after the closing down of the oil-refineries in the eighties. By analysing the product-market mix, using Chi-square Automatic Interaction Detection and multinomial regression, we could show that Aruba is less vulnerable. The accommodation portfolio includes private businesses and local chains next to the international chains. Each sector caters for different geographical markets, including Europe and South America and has its own strategy to avoid seasonality. Using input-output analysis we analysed the backward linkages of the tourist industry with the other sectors in the local economy, showing high multiplier effects to the benefit of the local population and indeed to people from abroad as the labour demand has surpassed the local supply of labour to a large extent. The diversified economy of Aruba has a decisive effect on the labour migration to the island. Using concepts from dual-labour market theory, we could show that, dependent on the sector in the economy, labourers with various skills are recruited from different countries. Dependent on the origins of labour migrant the statutory rights to family re-unification differ, leading to various forms of chain migration to the island. Using data on applications for residence permits might enable us to distinguish between the different type of migrants, highly skilled employees from developed countries, and international migrants, blue collar workers that bring their families to built a new existence in the receiving country.