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This paper studies the process of labour market formation in the tourism industry in Spain. Results show that tourism regions diverged in their capacity to attract local labour, a factor that led to different compositions of the workforce. In the most dynamic regions, circular migration became a key factor as a result of housing shortages, seasonality and labour policy. Tourism agents promoted these flows by different mechanisms such as recruitment at origin and temporary accommodation. Migration benefited growth of firms, natives' upward mobility and migrants' accumulation of capital. However, inequality in the regional labour market and host society increased.
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