Rocío Madera, Southern Methodist University

Paper: Urban Welfare: Tourism in Barcelona

Abstract: How do local demand shocks affect residents who live, work, and shop in different parts of a city? We derive a first-order welfare formula showing that residents benefit from higher earnings in the places where they work and lose from higher prices in the places where they shop. We also show how a local demand shock spreads through observed commuting and spending links as higher earnings generate further spending across the city. Together, these results yield a sufficient-statistics approach based on observed income and expenditure shares and estimated wage and price responses, without requiring a fully specified spatial model. We apply the method to seasonal tourism in Barcelona, using differences across tourists’ countries of origin in when they visit and where they spend. Tourism raises prices and reduces resident spending in the most exposed destinations, but it also raises incomes for residents connected to tourist areas through work and shopping networks. The January-to-July increase in tourism slightly lowers average real income; effects range from $-1.46$ percent at the 10th percentile to $+1.14$ percent at the 90th, with losses concentrated in the tourist center and gains in some peripheral neighborhoods. A nonlinear model yields a similar spatial ranking and is used to calculate location-specific tourist taxes after accounting for tourists’ responses and broader equilibrium effects.