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. This model can be used to simulate the economic impact of the tourism boom 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
3.2 Implementing the Model
3.3 Dimensions of the Model
3.4 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 Themes
The primary objective of this work is to develop a Computable General Equilibrium (CGE) model, specifically referred to as CGE-Tourism, to conduct comprehensive tourism impact analysis. By addressing the limitations of existing national accounting frameworks in identifying tourism as a distinct sector, the study provides a theoretical structure that incorporates tourism using a dummy sector approach within an ORANI-type CGE framework, allowing researchers to simulate the economic effects of tourism booms.
- Theoretical development of a CGE-Tourism model framework.
- Methodological approach for incorporating tourism via dummy sectors.
- Integration of tourism expenditure within an ORANI-type CGE model.
- Economic impact measurement through direct, indirect, and induced effects.
- Application of GEMPACK software for model implementation and simulation.
Excerpt from the Book
4.1.1 Demand for Different Occupational Categories of Labour
Demand for labour input is based on a two-stage cost-minimization process that reflects imperfect substitutability between labour types. As shown in Stage 1of the Figure 3, and also Figure 4, the CES function determines the optimal combination of occupation types to form each industry’s composite labour input.
The equations determining labour demands are given in Excerpt 2. For each industry i, the equations are derived from the following optimisation problem. The producers choose the combination of labour types to minimise the total labour cost. A CES function solves this problem in which substitutability is allowed between different types of labour.
Summary of Chapters
1 Introduction: Discusses the difficulty in identifying tourism as a single industry in national accounts and introduces the CGE-Tourism model as a solution for quantifying its economic impact.
2 Economic Impact Analysis of Tourism: Explains how international tourism expenditure acts as an invisible export, creating direct, indirect, and induced multiplier effects within an economy.
3 An Overview of the Model: Provides the theoretical foundations of the comparative static CGE-Tourism model, including its reliance on nested production functions and Johansen-style linear equations.
4 The System of Equations of the Model: Details the core mathematical structure of the model, covering input demands, output supply, household and government demand equations, price systems, and market clearing conditions.
5 Modelling the Tourism Sector: Describes the extension of the model by integrating a 'dummy' tourism sector into the conventional I-O data framework to accurately represent tourism activities.
6 Concluding Remarks: Summarizes the study’s contribution to the CGE modelling literature by departing from traditional methods through the dummy sector approach to simulate tourism impacts.
Keywords
Computable General Equilibrium, CGE-Tourism, Tourism Impact Analysis, ORANI Model, Dummy Sector, Economic Multiplier, GEMPACK, Input-Output Analysis, Labour Demand, Capital Formation, Trade Balance, GDP, Commodity Taxes, Economic Modelling, Economic Policy
Frequently Asked Questions
What is the primary purpose of this work?
The work aims to develop a specialized CGE model, named CGE-Tourism, to overcome the inability of standard national accounting systems to isolate and measure the economic contribution of the tourism sector.
What is a CGE model?
A Computable General Equilibrium (CGE) model is an applied economic tool used to analyze how different parts of an economy interact and how they respond to external policy changes or shocks.
How is the tourism sector integrated into this model?
The model uses a 'dummy sector' approach, which involves modifying the conventional Input-Output (I-O) database to treat tourism activities as a distinct industry that purchases components from other sectors and sells them to final consumers.
What scientific methods are applied?
The model employs microeconomic theory based on neo-classical assumptions, utilizing nested production functions (CES and Leontief) and comparative static policy simulations implemented via GEMPACK software.
What are the central thematic areas covered?
The study focuses on the theoretical structure of the model, demand equations for production factors and final users, price systems, market equilibrium, and the specific extension for tourism modelling.
Which keywords characterize this research?
Key terms include CGE-Tourism, economic impact analysis, dummy sector, ORANI model, multiplier effects, GEMPACK, and macroeconomic simulation.
What distinguishes the CGE-Tourism approach from traditional tourism modelling?
Unlike traditional methods, this approach allows for an economy-wide setting where the tourism sector interacts with other industries and final demand sectors while responding to relative price changes.
How does the model handle labour market equilibrium?
The model provides flexibility for the analyst to either set employment exogenously with endogenous wage rates or to exogenize wage rates, allowing employment to be demand-determined.
What is the role of the TABLO file mentioned in the text?
The TABLO file acts as an algebraic specification of the linear form of the model, organizing the various equations into sequences of excerpts for implementation within the GEMPACK software suite.
Why are nested production functions used?
Nested functions are used to model the complex multi-stage process by which firms optimize their costs, choosing between different types of labour, capital, land, and intermediate inputs based on constant elasticity of substitution.
- Arbeit zitieren
- Dr. Sriyantha Fernando (Autor:in), 2017, Theoretical structure of a tourism focused CGE model for measuring economic impact of an economy, München, GRIN Verlag, https://www.grin.com/document/370462
