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Antalya’s Mass-Tourism Growth has Triggered Economic Diversification

In economic geography, it has long been debated whether it is better for a city to be economically diversified or highly specialized. Cities are better off with economic specialization, it is argued, because they benefit from localization economies (firms in the same industry benefit from a specialized local labour market, the local availability of suppliers of specialized inputs and (semi-) public goods that can only be used by the same industry, a strong local interfirm competition, bonding social capital, and a local circulation of tacit knowledge).

Critics of the specialization thesis, by contrast, argue that cities are better off with economic diversification because they are better proof to industry-specific shocks and take advantage of urbanization economies (firms in different industries benefit from a variety of positive externalities, such as the availability of (semi-) public goods that can be used by different industries, a pool of specialized workers whose skills can be used in different industries, bridging social capital, and knowledge spill-overs between firms in different industries, the cognitive distance of which is not too large).

Empirical research has not given a final answer to this discussion. In their almost exhaustive review of all empirical literature on this question, Beaudry and Schiffauerova (2009) come to the conclusion that the empirical literature has provided substantial academic support for the positive impact of both specialization and diversity on regional economic performance, although specialization has a somewhat more negative impact than diversity. Thus, mass-tourism cities are not necessarily much worse off than non-tourist cities.

The (dis)advantages of specialization and diversification are mostly discussed in static terms. This is not very satisfying because small cities are almost always more specialized than big cities. To become more diversified, cities have to grow on the basis of economic specialization. Urban growth on the basis of mass-tourism leads to two opposite processes. On the one hand, the urban economy becomes more specialized in mass-tourism because other economic activities, including small-scale, alternative tourism services, are crowded out due to rising real estate prices, increased competition on the labour market, and various other negative externalities (in smaller cities, it is more difficult to escape from negative externalities than in larger cities). On the other hand, urban growth on the basis of mass-tourism leads to a diversification of the economy, including the tourist industry. First, the more economic growth, the larger markets are, and the more division of labour (as said Adam Smith two centuries ago). This applies certainly to the tourism sector that consists of a large number of different industries that are directly and indirectly related to tourism. Secondly, urban growth on the basis of mass-tourism leads to a growing local population that stimulates a diversification of services to the local population.

To find out which of above-mentioned two processes is strongest, Erku^-Ozturk and Terhorst (2015) made shift-share analyses1 of the economy of Antalya for the period 1990-2012. They find a fast and competitive growth of industries directly related to tourism (accommodation, food, and restaurant services) as well as some industries indirectly related to it (construction, wholesale and retail trade, arts, entertainment, culture, recreation and sports, social and related public services, real estate, and support activities), all of which have generated a diversification of Antalya’s tourism economy. On the other hand, a number of manufacturing industries have simultaneously been crowded out (especially textiles, apparel, leather, and related products). Thus, Antalya’s tourism economy has become more diversified, notwithstanding the crowding out of some manufacturing industries. This is confirmed by their analysis of Herfindahl-indexes.[1] [2] All industries directly and indirectly related to tourism have become more diversified.

In sum, the growth of Antalya’s mass-tourism has triggered a diversification of its economy. This suggests but does not proof that the increasing division of labour as a result of mass-tourism growth has stimulated the growth of a lot of flexibly specialized economic activities directly and indirectly related to tourism as well as activities unrelated to it.

  • [1] A shift-share analysis is a statistical technique to determine what portions of regional economicgrowth or decline can be attributed to national, industry, and regional factors.
  • [2] A Herfindahl-index measures the degree of firm diversification of an industry.
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