Estimating the economic impact of tourism industry through the MM approach

• Author: Socci C., Ali Y., Ciaschini M., Pretaroli R., Severini F.
• Pages: 127-152

Bulletin of the Transilvania University of Braşov

Series V: Economic Sciences • Vol. 9 (58) No. 2 - 2016

Estimating the economic impact of tourism industry

through the MM approach

C. SOCCI1, Y. ALI2

M. CIASCHINI3 , R. PRETAROLI4, F. SEVERINI3

Abstract: Tourism is one of the fastest growing industries in Italy and has proven to be a

valuable source of economic prosperity. The main issue emerging when measuring the

impact of tourism is that tourism is usually considered as a specific industry while in most

applied situations it shows traits of a complex and structured economic activity

characterized by a blend of different industries. We will identify the relationship among the

various industries making up the complex economic activity usually referred as the “tourism

industry”. This is done through the application of the multisectoral analysis to the Italian

case. The evaluation of tourism in terms of economic policy is performed through the

definition of an index of interaction among industries.

Key-words: Output changes, Input-Output Model, Key industry, Macro Multiplier approach

1. Introduction and methodology

Tourism is suitable, under many ways, to bring economic advantages to operators in

a country or a region. The World Travel and Tourism Council (WTTC) statistics

suggests that tourism is the second largest industry in the world, which generates

200 million jobs worldwide and accounts for 10% of global GDP (WTTC, 2003).

However when measuring the impact of the tourism industry both on total

output and GDP the main problem which arises is that a distinct tourism industry

doesn’t exists within list of industries in national accounts (NACE-CLIO) and the

quantitative links between the “tourism industry” and the industry outputs and GDP

of the economy have to be carefully reconstructed (Smeral, 2006). Tourism industry

appears then as an economic activity that relies on outputs and services provided to

tourists by the various industries that constitute the producing core of economy. For

1Corresponding author: claudio.socci@unimc.it, Department of Economics and Law, via Crescimbeni

14, 62100 Macerata – ITALY, phone number +3907332583263.

2 Ghulam Ishaq Khan Institute of Engineering Sciences and Technology, Topi, Pakistan.

3 Department of Economics and Law, University of Macerata, Italy.

4 Department of Economics and Law, University of Macerata, Italy.

Bulletin of the Transilvania University of Braşov • Series V • Vol. 9 (58) No. 2 - 2016

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identifying the potential economic contribution of tourism to a country's economy

the relationships of tourism data with data in the national accounts have to be put

under scrutiny as to the consistency and reliability of the source of information on

the economic dimensions of tourism. These reasons lead to consider the “tourism

industry” as a cluster of industrial activities associated with tourism: the Tourism

Cluster (Babalola, 2011).

Our study starts as an analysis of dispersion in an I-O model of the Italian

economy based on an I-O table (industry by industry) for year 2010 with 64

industries a tool for analyzing tourism effects and quantifying the direct and indirect

impacts of tourism as highlighted by (Henry and Deane, 1997; Fletcher, 1994;

Archer and Fletcher, 1996; Tyrrell and Johnston, 2001; Gul, 2015). We then further

deepen this analysis through the identification and quantitative determination of

aggregated Macro Multipliers (MM) (Ciaschini and Socci, 2006) that drive the

magnitude of the economic interactions through the structure of macroeconomic

variables (Ciaschini and Socci, 2007). The reference to two indices: “target

efficiency” and “control effectiveness” (Ali et al., 2015) will help the analysis

extending the focus from the industries towards the policies, intended as those

combinations of industries composing both the policy control variables and the

policy target.

2. Tourism industry as a cluster of industries

Tourism is one of the fastest growing industries in Italy. It has proven as to be a

valuable economic pillar of the Italian economy and we urgently need to determine

what really falls under tourism as a complex process. According to (UNWTO)

certain economic industries are defined as tourism industries (United Nations, 2008).

However, the tourism industry is implicitly included in the I-O tables as part of the

production of different industries such as “Accommodation services for visitors”,

“Hotel and Restaurant”, “Food and beverage industry”, “Land transport”, “Water

transport”, “Rail transport”, “Air transport”, “Supporting and auxiliary transport

services, recreational, culture and sporting services”, “retailing industry and country

specific tourism industry” (Maresca and Anzalone, 2011).

The tourism literature (UNWTO, 2007) covers a number of studies through a

variety of methods, ranging from pure guess work to complex mathematical models.

Many economists have emphasized the importance of more accurate quantification

of the economic impacts of tourism: (Madsen and Zhang, 2010; Frechtling and

Horvath,1999) identified four different approaches to estimate the regional and local

impacts of tourism based on national accounts and economic modelling; (Steenge

and Steeg, 2010) discussed the importance of tourism by using input output table

and tourism satellite accounts for a small Caribbean island; (Mantente, 1999;

Manente and Zanette, 2010) conducted a study on the macroeconomic effects of a