Evaluating tourism's economic effects: new and old approaches

Abstract

Techniques such as multiplier analysis and Input–Output analysis are still very commonly used to make estimates of the economic impact of changes in tourism expenditure. These techniques have serious limitations, and as a result, alternative techniques have been developed to address the problems. Computable General Equilibrium (CGE) models are now extensively used, especially in Australia, the UK, the US and Canada, to estimate economic impacts of a wide variety of changes and policies, across most sectors. CGE techniques have been used in the tourism context, but so far, not extensively. Economic evaluation in tourism thus fails to achieve best practice. The paper presents arguments in support of CGE modelling as the preferred technique in analysing the economic impacts of tourism, and discusses its potential to drive future research in this area that is more relevant to real world tourism destinations.