Question

In relation to externalities, are there any private and external benefits of traveling abroad from the standpoint of a traveler? If yes, what are they?

Answer 1

Firstly, to say that externalities of travelling from the standpoint of traveller is a little self-contradictory. This is because the concept of externalities is associated with the element of non-participation. We say that an externality is being accrued, which implicitly means benefits / costs are accruing to those who are not party to the transaction or economic activity. Of course, private benefits can accrue to the travellers, but not externalities or external benefits.

Externality on account of travelling abroad, or travelling in general, can be observed when tourists help in the expansion of domestic market size. For example, if somebody from the western world travels to some culturally different region, say like India, and they discover that very diverse products are available there at a very competitive price, and motivates his / her compatriots to import Indian products, this will help raise Indian exports, not only of the person who was directly involved in an economic transaction with the tourist, but also of Indian industry in general.

Another way to think about tourism related externalities is this - now let's assume that tourist stays in a hotel on his / her sojourn to India. And not only that one tourist, many others also do. So the supplies that this hotel provides to these tourists are obtained from domestic vendors. So when the hotel's tourist business rises, domestic suppliers (for example say those supplying toiletries, linen, kitchen ingredients etc.) are also benefitting.

Private benefits of travelling are of course huge. In non-economic terms, especially so. Tourists learn about new cultures, new lifestyles, new languages, and so much of otherwise unknown information. In pure economic terms, there may / may not be very tangible benefits. But it's not difficult to think about some examples. Let's bring back our earlier tourist again. Say the tourist is himself a business owner, who realises that his / her destination can offer a new business opportunity.