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Estimating Impact of Tourism through Input-Output analysis

There have been several attempts by researchers to estimate the importance of tourism activities in a region or at the local level. The greatest difficulty in these analyses traditionally had been the fact that no separate industry can be identified as tourism industry which could exclusively cater only to the tourists. At the same time this non-existent industry plays key role in shaping the economy of the various regions or areas even countries.

The tourism industry, which is a combination of several sectors of the economy, caters to local residents and industries as well as non-resident customers. For example, the restaurants in any area serve to several customers who are residents as well as non-residents of that specific area. Any analysis that considers the transaction of this sector in its totality for estimating the benefit derived from tourism expenditure ends up with highly overestimated multipliers.

To make things simpler for the readers who are not familiar with the much used and important tool of economic analysis, the input-output model is explained below without going into its technicalities. An input-output model is primarily production oriented and takes into account the transactions within an economy for the purchasing sectors and selling sectors at different stages of the consumption, i.e., intermediate and final. It also takes into account the export-import components as well as private and government consumption. All these parameters, finally, allow identifying the value addition by each sector to the economy. As an analytical tool it computes the coefficients and the multipliers for each sector which depicts the impact of each sector on every individual sector of the economy as well as on the overall economy.

With the help of input-output analysis, one can measure impact of the tourism sector in terms of output, income and employment generation within the economy.

This article is written by Dripto Dripto Mukhopadhyay, Vice President at Indicus Analytics. Read his public LinkedIn profile .
This article is written by Majbritt Thomsen, administrator on ‘Views On Tourism’

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Posted in Education and qualification, India, Performance and management, World.


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