Estimating Impact of Tourism through Input-Output analysis

 By Dripto Mukhopadhyay

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. 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.

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20 responses to “Estimating Impact of Tourism through Input-Output analysis

  1. Dear Dripto,
    As per TOFT (Tour Operators for Tigers – http://www.toftindia.org), Tigers B2 of Bandhavgarh & Machhali of Ranthambore have helped in earning US Dollars 100 Million for the Indian economy. What might be the inputs to derive such a figure.

  2. Dripto Mukhopadhyay

    Dear Dhaval
    The scientific way of arriving at this sort of number is to gather data on several components of the tourists visits to a particular place. One needs to collect infrmation on accommodation expenditure, food expenditure, expenditure on transport, guide and other peripheral components. And finally, of course the total number of tourists visiting those places. This can be done through primary durvey of the tourists visiting to that place if the intention is to arrive at a genuine and authentic number.

    Thanks.

    Dripto

  3. Dear Dripto,
    Thank you very much for simplified version of IO. I am doing PHD in Lincoln using IO model of tourism impacts in Laos. I plan to use IMPLAN software for this. Is it possible to have other software. We have only 21 economic sectors including tourism sector in Laos. Highly appreciate your clues on IO model. Thanks, bhoj

  4. Dripto Mukhopadhyay

    Dear Bhoj

    Nice to see your mail. In India we have about 130 sectors in IO tables now. I generally use stata for all the computations step by step without using any particular software. You can also try it. It does not take much time as well as in case of any error occurs in between, you can immediately identify them.

    Best wishes.

    dripto

  5. Hey Dripto

    I am a student working with input output analysis but I was pretty unsure of how to arrive at multipliers. It would be great if you could help me out. I am working on developing I-O table for delhi’s economy. As of now, I have been able to make 15*15 commodity into commodity matrix for Delhi region table .
    Regards
    Apoorva Gupta

  6. Dripto Mukhopadhyay

    Hi Apoorva

    Good to know you. Which course you are in? Ph. D. ? If you are from Delhi, we can meet some day and see whether I would be able to help you in developing the I-O table further.

    Regards

    Dripto

  7. Hey Dripto
    My story is quite uncanny, I am engineering student working on a report pertaining economic Impact of common wealth games Delhi, 2010. This is project was also done previous year, I am supposed to work with latest data and follow the previous model. As of now, I am able to construct a 15*15 com com matrix for delhi, clustering the I-O table for India year 06-07.To estimate the impact on Income, I am supposed to have data for “value added” from Delhi’s Statistical Abstract. I am stuck in between and as I come from a different background I am in a fix.I have to use it to arrive at income multipliers but I have no clue about the same. I am reading day and night about the same. Yeah I am placed in Delhi and It would be really nice if you could give me a helping hand.

    Regards
    Apoorva

  8. Dripto Mukhopadhyay

    Thats great….lets meet sometime this week, preferably on friday evening around 6.00?

  9. We can meet in CP at Cafe Coffee Day if you fine with the locale. 5 would work fine with me. I just saw your profile and saw that you have worked for NCAER, this the organization thats worked on the technical aspect of this report under Dr. Sanjib Pohit. I believe you must be knowing him too.

    Regards
    Apoorva

    • Dripto Mukhopadhyay

      I am generally at office till 6.00 or so. Too much work to leave office earlier than that. My office is at ITO near Times of India. We can meet at UDUPI located in the same lane. Its about 1/2 min. walk from my office. Let me know if you are comfortable.

      Sanjib is a close friend of mine and we have worked together for a few studies.

      Take care

      Dripto

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  11. Good to know that you became an IO expert!

    • Dripto Mukhopadhyay

      Thanks. I do not know whether I can consider myself as an expert in IO or not, but have done 6/5 studies on IO. So, perhaps know at least the basic analysis!!!! By the way, since your name is not displayed, I could not get who you are. If you kindly identify yourself.

      Regards
      Dripto

  12. Hi all, I am doing my PhD. I am doing a research to estimate the economic impacts of tourism in local level. I reviewed some of the models like TSA, SAM, CGE, and IO. At the beginning, I wanted to use IO for my methodology but the recent literatures seem like side to CGE and claimed CGE is the most compressive model. I am confuse now, should I proceed to CGE owing to the past studies claim? Hope to get some opinions about that. Thank you.

    • Dripto Mukhopadhyay

      Hi Chia, its good to hear from you. CGE is the certainly better modelling over IO. Though the basic framework of IO and CGE is more or less similar, but CGE is more dynamic and can accommodate lot more information than IO. However, since you are working on impact at a micro level, SAM can be very purposeful since SAM will help you in identifying impact on household sector, rural-urban, government, private sectors etc. separately. This will make your analysis perhaps more meaningful since it directly captures those which an impact analysis at a micro level looks for. Thanks. Dripto

  13. Thanks for the comment Dripto. My study is related to rural tourism. To date, I don’t know what is the size and the economic impacts of tourism in that district. On top of that, my supervisor attempts to use IO analysis (incorporating with IMPLAN) to study a rural tourism district, such as employment, income, output. He is more familiar with IO than other models. I am confusing what is the theory behind the IO analysis? Is it theory of production? There is lack of literature discussing about the theory behind the IO analysis. Hope to hear from you soon.

  14. Dripto Mukhopadhyay

    The basic theory behind IO is production-technology in economic circuit. You can go through this paper: “The input-output framework and modelling assumptions:
    considered from the point of view of the economic circuit”…..http://www.iioa.org/pdf/16th%20Conf/Papers/avonds%20The%20input-output%20framework%20and%20modelling%20assumptions.pdf
    This will provide you the theoretical base of input-output analysis. Apart from this the original Leontief paper should also help you.

  15. Thank you Dripto. Limitations look devasting, is it still worth continuing IO model to estimate the economic impacts of tourism in a district level? I do not have regional IO table, one of the objectives of my study is to collect the visitors’ expenditure and hope that the info can help me for the later analysis. It”s hard to get the secondary data in my study area. Please advice me. Thank you! Have a nice day

  16. Dripto Mukhopadhyay

    Hi Chia, I do not know for which country you are from and the IO table is available at what level. Perhaps you can write me the details to my mail ID.
    dripto.mukhopadhyay@gmail.com. This is my perosnal ID.
    It is quite difficult to construct an input output table at district level unless you have regional/state level. The prime reason is information available at district level may not be enough for constructing district level IO table. Of course IO analysis has several limitations. However, Ph. D. is the basic step for learning research, if you can construct IO table at district level and estimate the impact of tourism, that would suffice a lot. To me, instead of IO table, Social Accounting Matrix (SAM) would have served your purpose more. Thanks.

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