Economic impacts

Question 1

Name the positive economic impacts of tourism?

Answer 1

Direct effects:
- tourist spending (hotel, restaurants, entertainment, transport)

Indirect effects:
- supply chain (agriculture, manufacture, services)

Induced effects:
- more wages (due to spendings in local community).

Related concepts are:
leakage
- expenditure that does not flow back into local economy due to imports
- linkage
benefits to general economy and supply chain.

Question 2

Name the negative economic impacts of tourism?

Answer 2

1. High dependance of tourism (mostly tropical islands with no general economy)
2. Volatility of tourism demand (economic crisis, terrorism, politics, pandemics, new competitors)
3. Local inflation (high consumption drives up local demand and prices)

Related concept is:
leakage:
- expenditure that cannot be retained due to foreign investments
- pre-departure spendings.

Question 3

Which actions could mitigate the negative economic effects?

Answer 3

1. actively diversify local economy
2. regulate tourism flows
3. regulate tourism stays in private properties
4. limit foreign ownership of local property

Question 4

How can we measure economic impact?

Answer 4

1. multiplier analysis:
   - keynesian theorie
   - tourism spendings can serve as a catalyst of income and multiply in circulation > increase GDP by more than tourism spendings
2. input-output analysis:
   - detailed analysis
   - mapping all relationships to estimate multiplier.

Question 5

Explain the multiplier analysis?

Answer 5

Money spend by government or company runs through the general economy and multiplies. Money keeps circulating until money gets insignificant.

Imports and savings are leakage.