Economics & Finance / Macroeconomics / Economic Growth & GDP

Tourism Doesn't Just Create Jobs—It Boosts Manufacturing?! The Mexico Coastline Evidence

Benjamin Faber, Cecile Gaubert

Conventional wisdom says tourism is a low-productivity trap that drains resources from manufacturing. But a landmark study on Mexico's coastline flips that script. Economists Benjamin Faber and Cecile Gaubert analyzed decades of data and found that a 10% increase in local tourism revenue actually lifts manufacturing GDP by 3.9%—not just through hotel demand, but through powerful cross-sector spillovers. Using clever natural experiments like white sand beaches and ancient ruins, they show how tourism drives local employment, wages, and population growth. Yet, when you zoom out to the national level, the story gets trickier: those local gains partly cancel out as workers move from other regions. This video breaks down the surprising mechanics behind tourism's economic impact, what it means for policy, and why the 'Dutch disease' fears may be overblown.