Scenic tourism routes and local economic conditions

How do public investments in scenic tourism routes affect local socio-economic conditions? Using an event study methodology, we address this question exploiting variation over time and space in the opening of attractions along 18 scenic tourist routes across the Norwegian territory (2003-2019). Our main findings indicate that opening a tourist route attraction shifts the employment structure within a municipality towards the hospitality sector, while leaving the overall unemployment rate unaffected. This shift towards the typically lower-paying hospitality sector is linked to a decrease in average income levels at the municipality level, which, in turn, negatively affects municipal revenues from income and wealth taxation. These results suggest that public investments in tourism decided by higher levels of government can involve the risk of unintended, negative side-effects at the local government level.