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Externalities are the unintended impacts of one economic activity on another activity or on people’s well-being. These impacts can be positive or negative. The travel and tourism industry causes positive externalities as it increases the efficiency of other industries and stimulates investment in infrastructure and in activities that benefit local residents and businesses. The industry also has negative externalities, including the effects of transportation and other activities on the local and global environment, the disruption of local communities, and the increase in road accidents and congestion in the use of space, facilities, and transportation systems. The application of public policies to correct externalities, using economic instruments such as taxes and charges, is technically complex and often lacks public support.

Concept

The concept of externalities is used in ...

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