Can rising tourism income compensate fading agricultural income? A general equilibrium analysis of income distribution and welfare in a rural village in Northern Thailand.

This study applies CGE model to investigate the effects of rising tourism income and fading agricultural income in Mae Kam Pong village in Chiang Mai, Thailand, on 4 issues: the expansion and recession of major economic sectors, income distribution, social welfare of the village, and welfare of the poorest households. Simulations show that services and construction sectors will expand while tea, commerce and tourism sectors will face the recession. Tourism sector will fade out from the village when tea price drops 20% and tourism price increases around 30%. For the income distribution, the richest quintile will be the top gainer whereas the poorest quintile will be the top loser. The village can maintain its social welfare by raising tourism price 46.5% to compensate the drop of tea price around 10%. It is impossible to maintain the social welfare when tea price drops 20%. The dropping welfare of the poorest households cannot return to its original level after tourism price increases.