The Economic Impacts of Tourism

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The Economic Impacts of Tourism

ABSTRACT
Tourism has been criticised for having negative impacts on many of the destinations which tourists visit. There are considered to be three principal impacts - economic, environmental, & socio-cultural. This study looks at economic impacts and finds that although there are some negative aspects, most economic consequences of tourism are beneficial. These benefits include the effects of price and income elasticity, and also the economic consequences of tourism spending, including the generation of foreign exchange. This process stimulates the local economy through the multiplier effect, which can be direct, indirect, and induced. The article uses three tables to explain the multiplier, and policy implications are reviewed, using Turkish and Jamaican studies as reference points. At the same time, the difficulties faced when calculating multipliers are considered, and also how multipliers in deflationary situations can turn from being positive to negative. Although the economic effects of tourism are usually held to outweigh tourism�s economic benefits, the negatives can be significant. These negatives relate particularly to a likely increase in demand for imported goods once tourists begin to appear, revenue leakages out of the economy, over- dependence on tourism, and land value inflation. The study concludes that the economic benefits of tourism normally outweigh what negative features there may be. But it also acknowledges that the situation is much less clear-cut when considering environmental and socio-cultural issues as opposed to economic ones. INTRODUCTION

Tourism is usually described as having three major types of impacts on many of the places which tourists visit (Cooper et al, 1993). These effects are economic, environmental, and socio-cultural in nature (and some people have mentioned political consequences also). However, some impacts have been attributed to tourism though they may in fact originate elsewhere. Instead, more appropriate sources may be the media, the advertising & fashion industries, new industrial development, urbanisation, modern agriculture, mining and forestry projects, and government and military activity. But while all these factors can be described as frequent features of modern societies, it is widely believed that travel and tourism do generate impacts, including economic ones. BENEFICIAL ECONOMIC IMPACTS

Unlike some of its environmental
and socio-cultural effects, tourism�s economic impacts are mainly considered to be beneficial. These are: * the generation of foreign exchange,
* the creation of new job and employment opportunities,
* the stimulation of trade, income and entrepreneurship - especially in the service and small business sectors, * the provision of new infrastructure which is available for non-tourism uses, * increased regional development - particularly in isolated areas, * greater tax revenues permitting greater government spending - or reduced taxes on other activities, and * the operation of what is called the multiplier effect.

Price and Income Elasticity
Leisure tourism is considered to be price and income elastic (Cooper et al, 1993), and therefore very responsive to economic conditions in both host and traveller-generating countries (eg USA & Japan). Price decreases and increases in destination countries (eg Thailand & Malaysia) are likely to, respectively, encourage or discourage some tourists from the traveller-generating countries (who would otherwise have visited) from coming. Similarly, income rises and income falls will have a parallel effect, respectively encouraging or discouraging overseas visiting by citizens of the traveller-generating nations. The Economic Impacts of Tourists� Spending

The economic effects of visitors� presence at destinations arise from the fact that travellers and tourists spend their money on a wide variety of goods and services. This expenditure...
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