Conventional literature has proven that Computable General Equilibrium (CGE) modelling is the best applied tool addressing and analysing tourism related issues in an economy. Therefore, the aim of this paper is to develop a Computable General Equilibrium Model for an economy (hereafter referred to as CGE-Tourism) for tourism impact analysis. The core model of CGE–Tourism closely follows the well-known Australian ORANI model and the extension of tourism to the core model closely follows the recent work of Australian tourism modellers. This paper contains six sections. The second section provides a brief summary of economic impact analysis of tourism. Section three outlines the overview of the theoretical structure and implementation of the CGE-Tourism model. The system of equations of the core model of CGE-Tourism is presented in section four. Section five describes the new extension of tourism modelling to the core model.
Measuring the contribution of tourism to a national economy has always been a frustrating exercise. Tourism does not have specific products. It represents the sum of expenditure by travellers for wide range of products. It is not possible to identify tourism as a single "industry" in the national accounts, its value to the economy is not readily revealed. As a result of the absence of tourism in official economic statistics, there is often an on-going battle to establish tourism credibility as an economic activity and generator of income in the economy. As a result, a significant volume of tourism research over the past few decades have focussed on the development and use of a variety of economic techniques aimed at quantifying the effects of tourism on an economy. In conventional literature has proven that Computable General Equilibrium (CGE) modelling is the best applied tool addressing and analysing tourism related issues in an economy. The paper provided a complete description of the theoretical structure of the CGE-Tourism including all equations and variables by using relevant Excerpts for different blocks of equations in the TABLO file associated with the GEMPACK software used to operationalise the model. The incorporation of tourism using the dummy sector approach into an ORANI type CGE model as an extension and can be considered as the main contribution of this study to the CGE modelling literature for An economy. This is a clear departure from the traditional methods used for tourism modelling in an economy.
Table of Contents
1. Introduction
2. Economic Impact Analysis of Tourism
3. An Overview of the Model
3.1 The Theoretical Structure of the Model
3.1 Implementing the Model
3.2 Dimensions of the Model
3.3 Variables and Coefficients of the Model
4. The System of Equations of the Model
4.1 Input Demands for Current Production
4.1.1 Demand for Different Occupational Categories of Labour
4.1.2 Demands for Aggregated labour, Capital and Land
4.1.3 Demands for Intermediate Inputs
4.1.4 Top Level Demands for Composite Inputs
4.2 Supply of Outputs for Domestic Market and Export Market
4.3 Inputs Demands for the Production of Fixed Capital
4.4 Demand Equations
4.4.1 Household Demands
4.4.2 Foreign Demand for Exports
4.4.3 Government Demands
4.4.4 Inventory Demands
4.4.5 Demands for Margins
4.5 Price System and Zero Profit Conditions
4.5.1 Power of Taxes and Indirect Tax
4.6 Market Clearing Equations
4.7 Miscellaneous Equations
4.7.1 Gross Domestic Product (GDP)
4.7.2 Trade Balance, Basic Imports and Real Exchange Rate
4.7.3 Primary Factor Aggregates
4.7.4 Investment and Rates of Return
4.7.5 Labour Market Equilibrium
5. Modelling the Tourism Sector
5.1 Modification of Data Structure
5.2 Theoretical Structure of the Tourism Extension
6. Concluding Remarks
Research Objectives and Topics
The primary aim of this research is to develop a specialized Computable General Equilibrium (CGE) model, termed CGE-Tourism, designed to quantify and analyze the economic impacts of tourism, a sector traditionally difficult to isolate within official national economic statistics due to its lack of unique product identity. The research addresses the challenge of integrating tourism into the established Australian ORANI-style CGE modeling framework to provide a robust tool for policy analysis regarding tourism booms.
- Methodological development of a dummy sector approach to isolate tourism activities in Input-Output databases.
- Implementation of a multi-stage nested production and consumption function structure to represent tourism-related economic flows.
- Detailed algebraic specification of the CGE-Tourism equations, covering production, consumption, trade, and market clearing conditions.
- Simulation and policy analysis of the economic ripple effects triggered by tourism spending within an economy.
Excerpt from the Book
3. An Overview of the Model
This section provides an overview of the CGE–Tourism of an economy.
3.1 The Theoretical Structure of the Model
The CGE-Tourism closely follows the theoretical structure of the well-known ORANI-G model (Dixon et al., 1982; Mark Horridge, 2003; Mark Horridge, Parmenter, & Pearson, 2000) of the Australian economy by extending it to include thr tourism sector. Like ORANI-G, CGE-Tourism is a Johansen class (Johansen, 1960) CGE model which is solved by representing the economy as a series of linear equations incorporating percentage changes in model variables rather than an equations system in level form. The use of linear percentage change form of the model instead of linear equations can be explained as follows. Rather than writing Y = f (X1, X2) where Y is output and X1 and X2 are inputs, the linear percentage change form of the model can be written as y – ε1 x1 – ε2 x2 = 0 where εi is elasticity of output with respect to inputs of factor i, and y, x1 and x2 are percentage changes in Y, X1 and X2. This approach owes its origin to Johansen (1960). In matrix form, Johansen model is represented by Az = 0, Where, A is a matrix of coefficients and z is the vector of percentage changes in the model’s variables. Since the matrix A is assumed to be fixed, it provides only a local representation of the equations suggested by economic theory.
Summary of Chapters
1. Introduction: This chapter highlights the difficulty of measuring tourism's economic contribution in standard accounts and introduces the CGE-Tourism model as an effective analytical tool for this purpose.
2. Economic Impact Analysis of Tourism: This section explains the transmission mechanisms of tourism expenditure, illustrating how direct, indirect, and induced effects create wider economic impacts.
3. An Overview of the Model: This chapter details the theoretical foundation of the CGE-Tourism model, including its implementation using GEMPACK software, dimensions, and variable conventions.
4. The System of Equations of the Model: This core chapter provides an exhaustive breakdown of the algebraic equations governing industry input demands, final demands, price systems, and market-clearing conditions.
5. Modelling the Tourism Sector: This chapter describes the practical application of the dummy sector approach to modify conventional Input-Output databases, allowing tourism to be explicitly analyzed.
6. Concluding Remarks: This final section summarizes the model's structure and affirms its contribution to tourism literature as a departure from traditional modeling methods.
Keywords
Computable General Equilibrium, CGE-Tourism, Input-Output Database, Tourism Impact Analysis, Dummy Sector Approach, Economic Multipliers, GEMPACK, TABLO Language, Nested Production Function, ORANI Model, Policy Simulation, Macroeconomic Variables, Tourism Expenditure, Economic Statistics, Structural Modeling
Frequently Asked Questions
What is the primary focus of this research paper?
The paper focuses on developing and detailing a specialized Computable General Equilibrium (CGE) model, named CGE-Tourism, to effectively analyze and quantify the economic impact of the tourism sector.
What are the central thematic fields covered?
The themes include economic impact analysis, CGE modeling theory, Input-Output database modification, and the specific algebraic structure required to model tourism as an integrated dummy sector.
What is the main objective or research question?
The objective is to overcome the frustration of measuring tourism in national accounts by establishing a robust, simulation-ready CGE model that treats tourism as an economic activity and income generator.
Which scientific methodology is employed?
The paper utilizes a comparative-static CGE modeling methodology based on the Australian ORANI-G model, implemented via the GEMPACK software suite using TABLO code.
What does the main body of the work cover?
The main body provides a comprehensive system of linear equations describing industry input demands, consumer behavior, export and government demands, and price/market-clearing conditions.
Which keywords best characterize the work?
Key terms include Computable General Equilibrium, CGE-Tourism, Dummy Sector Approach, Economic Multipliers, and GEMPACK.
How does the model handle the fact that tourism is not a single "industry" in national accounts?
The model employs a 'dummy sector' approach, which disaggregates relevant expenditures and groups them into a specific tourism sector, allowing it to interact with the broader economy without requiring explicit primary factor purchases.
Why is the linear percentage change form used in the CGE model?
The linear percentage change form, rooted in Johansen (1960), is used to simplify the solution process by representing the economy through a series of linear equations involving percentage changes in variables instead of complex level-form equations.
How are exports and domestic sales differentiated within the model?
The model uses a Constant Elasticity of Transformation (CET) function in the production nest to allocate commodity supply between domestic and export markets based on relative price changes.
- Citar trabajo
- Gunawarna Waduge (Autor), 2017, Developing a Tourism Focused Computable General Equilibrium Model, Múnich, GRIN Verlag, https://www.grin.com/document/370387
