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Chapter 1.
Computable general equilibrium (CGE) models and tourism economics
Introduction
Computable general equilibrium (CGE) model !a"e been e#tremel$ popular %or t!ee lat
%ort$ $ear %or t!e e"aluation o% trade and %i&al poli&ie and %or t!e meaurement o% t!e
e%%e&t o% !o&' on t!e e&onomi& and o&ial &ondition in a &ountr$( epe&iall$ t!e tru&ture
o% it produ&tion e&tor and it in&ome ditribution) *obinon (1+,+) and -i#on and
Parmenter (1++.) gi"e e#&ellent and $nt!eti& introdu&tion to t!ee model and t!eir
appli&ation to de"eloped and de"eloping &ountrie)
/!e appli&ation o% CGE model to tourim e&onomi& i mu&! more re&ent( mainl$( a 0e 0ill
ee( be&aue o% a la&' o% pre&ie and reliable data) 1o0e"er( t!e qualit$ and quantit$ o%
in%ormation on tourim a&ti"itie !a"e teadil$ impro"ed in a large number o% &ountrie in&e
t!e beginning o% t!i de&ade) /!e number o% CGE model in&luding tourim a&ti"itie( and o%
appli&ation to problem 0!ere tourim pla$ an important role( !a"e %ollo0ed t!i
mo"ement)
-0$er( 2or$t! and 3purr (2004) and 4la'e( Gill!am and 3in&lair (2005) 0rote t0o e#&ellent
ur"e$ on t!e appli&ation o% CGE model to t!e anal$i o% tourim) /!i &!apter 0ill tr$ to
&omplement rat!er t!an dupli&ate t!ee t0o paper( %or intan&e b$ gi"ing more importan&e to
t!e te&!ni&al %eature o% CGE model)
/!e %irt e&tion preent t!e %oundation o% CGE model) /!ee model !a"e a t!eoreti&al
5alraian tru&ture) 4ut to be imulated( t!eir mat!emati&al %un&tion !a"e to be
parameteried) /!en( t!ee parameter !a"e to be gi"en numeri&al "alue t!at are &alibrated)
/!e e&ond e&tion e#plain !o0 international trade and t!e go"ernment are introdu&ed in a
CGE model) /!en( it di&ue t!e trengt! and limit o% t!ee model) /!e t!ird e&tion
preent t!e re&ent impro"ement in t!e $temati& &olle&tion o% data on tourim b$ man$
indutrialied and de"eloping &ountrie) /!en it !o0 !o0 t!ee data &an be ued to
introdu&e tourim a&ti"itie in a CGE model) /!e lat e&tion preent a erie o% appli&ation
o% CGE model to tourim e&onomi& quetion)
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1. The foundations of computable general equilibrium (CGE) models
/!e t!eoreti&al bai o% CGE model i t!e 5alraian general equilibrium model( in it
modern %orm de"eloped b$ 6rro0 and -ebreu) /!i model ue a "er$ general mat!emati&al
pe&i%i&ation %or t!e pre%eren&e o% t!e agent and t!e produ&tion abilitie o% %irm) 5e !a"e
to be mu&! more pe&i%i& and introdu&e %ull$ pe&i%ied parameteri7ed utilit$ and produ&tion
%un&tion to be able to run imulation) /!e 5alraian model operate 0it! indi"idual good
and agent) /o ma'e t!i model operational in applied reear&!( 0e mut intead ue
aggregate) /!en( %inall$( 0e !a"e to gi"e numeri&al "alue to t!e parameter o% t!e model(
t!en ue a imulation algorit!m)
6 CGE model i a "er$ "eratile tru&ture( 0!i&! &an eail$ be adapted to t!e pe&ial %eature
o% an$ e&onom$( to t!e quetion t!at are a'ed( and to t!e data( 0!i&! are a"ailable) 8t
aumption &an eail$ be &!anged o t!at t!e reult o% a imulation &an be interpreted( %or
intan&e( a de&ribing a !ort9term equilibrium( or a medium9run equilibrium)
/!e bai& t!eoreti&al 5alraian model %or a tati& e&onom$ 0it!out un&ertaint$ 0ill be
preented in t!e %irt paragrap!) 5e 0ill introdu&e a %le#ible and ea$ to ue parameteri7ation
o% t!e general mat!emati&al %un&tion o% t!i model in t!e e&ond paragrap!) 8n t!e t!ird
paragrap!( 0e 0ill !o0 !o0 to ubtitute indi"idual good and agent b$ aggregate) /!en(
0e 0ill e#plain !o0 t!e model &an be &alibrated( t!en imulated) 5e 0ill &omment on t!e
"eratilit$ o% CGE model in t!e lat paragrap!)
1.1. Mathematical theory
5e 0ill %ollo0 t!e eminal preentation o% t!e 5alraian model b$ -ebreu (1+5+)) 5e
&onider an e&onom$ 0it! l &ommoditie inde#ed b$ h. Commoditie di%%er b$ t!eir nature(
t!eir qualit$ or t!eir lo&ation) /!i e&onom$ in&lude n %irm inde#ed b$ j and m !oue!old
inde#ed b$ i) /!e produ&tion o% %irm j i
l
j j
R Y y
) j
Y
i t!e produ&tion et o% %irm j(
0!i&! repreent it produ&tion abilitie and
l
R
i t!e &ommodit$ pa&e) 1oue!old i
&onume t!e &ommodit$ bundle
l
i i
R X x
0it!
i
X
being t!e &onumption et o% t!i
!oue!old) Commoditie &an be e#&!anged %reel$ on mar'et at pri&e
l
R p )
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/!e negati"e &omponent o% j
y
are t!e input o% %irm
j
( and it poiti"e &omponent are it
output) /!en( t!e pro%it o% t!i %irm i

=
=
l
h
hj h j
y p
1

) 5e aume per%e&t &ompetition on

ea&! mar'et) /!u( %irm j &!ooe t!e produ&tion( 0!i&! ma#imie it pro%it in it produ&tion
et)
/!e poiti"e &omponent o%
i
x
are t!e input o% !oue!old i) 8t negati"e &omponent are it
output) 5e aume t!at t!i !oue!old !a a utilit$ %un&tion de%ined on !i &onumption et
( ) x u
i
and o0n a 0ealt!
R w
i

) 1e &!ooe t!e &onumption( 0!i&! ma#imie !i utilit$ in
!i &onumption et( under !i 0ealt! &ontraint

l
h
i hi h
w x p
1
)
Ea&! !oue!old i o0n an endo0ment o% &ommoditie
l
i
R
( and get a !are ij

o% t!e
pro%it o% %irm
j
( 0it!
0
ij

and

=
=
m
i
ij
1
1
) 3o( t!e e#preion o% !i 0ealt! i

= =
+ =
n
j
j ij
l
h
hi h i
p w
1 1

)
6n equilibrium o% t!e e&onom$ i de%ined b$ a pri&e "e&tor u&! t!at on ea&! mar'et h 0e
!a"e
= = =
+ =
m
i
hi
n
j
hj
m
i
hi
y x
1 1 1

)
5e &an eail$ noti&e t!at i% p i an equilibrium pri&e(
p
( 0it! 0 > i alo an equilibrium
pri&e) ;oreo"er t!e l equilibrium equation are linearl$ dependent be&aue 0e &an eail$
etabli! t!at
= = = = = =
+
m
i
hi
l
h
h
n
j
hj
l
h
h
m
i
hi
l
h
h
p y p x p
1 1 1 1 1 1

( t!e o9&alled 5alra< identit$)
/!u( 0e !a"e to ol"e a $tem o% l-1 equation 0it! a man$ un'no0n "ariable) 6n$
&ommodit$ or bundle o% &ommoditie &an be ta'en a numeraire and !a"e it pri&e et to 1 (a
oon a it i non 7ero))
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-ebreu pro"ed t!at t!ere e#it an equilibrium in t!i e&onom$ under a et o% aumption on
t!e produ&tion and &onumption et and on t!e utilit$ %un&tion o% !oue!old) 1e alo
pro"ed t!at t!i equilibrium i Pareto optimal) 1o0e"er( !i purel$ mat!emati&al approa&!
&annot lead u mu&! %art!er) 8% 0e 0ant to do tati& &omparati"e e#er&ie (%or intan&e 0!at
0ould be t!e e%%e&t o% a reditribution o% t!e pro%it !are a&ro !oue!old=) or e#tend t!e
model to0ard more realim (adding a Go"ernment and ta#e and in"etigate t!e e%%e&t o% t!e
ta# tru&ture) 0e mut ue imulation met!od)
1.2. From a mathematical to a computable general equilibrium model ! "arameteri#ation
"an der ;enbrugg!e (2005) de"elop a "er$ &omplete and %le#ible &omputable general
equilibrium model( 0!i&! en&ompae mot o% t!oe &urrentl$ in ue) 5e 0ill ue it a a
re%eren&e in mot o% t!i &!apter) 2irt( 0e !a"e to &lari%$ t!e abtra&t &on&ept o% &ommodit$
b$ ditingui!ing good inde#ed b$
1
())( 1 l h =
( &apital and land inde#ed b$
2 1
())( 1 l l h + =
(
and t!e "ariou 'ind o% labour inde#ed b$
l l h ())( 1
2
+ =
)
CGE model e#teni"el$ ue t!e te&!nique o% neted CE/ and CE3 %un&tion) 5e 0ill e#plain
t!i te&!nique in t!e &ae o% t!ree de&iion ta'en b$ %irm j) 2irt( 0e aume t!at t!i %irm
produ&e t!e quantit$ j
y
0 o% a compo$ite good( 0!i&! i tran%ormed into a bundle o% good
hj
y
( 0it!
1
())( 1 l h =
( b$ t!e CE/ %un&tion o% tran%ormation elati&it$ j

>

=
+ +
=
1
1
1 / 1 1 / 1
0
l
h
hj hj j
j j j
y y

( in a 0a$ 0!i&! ma#imie t!e "alue o% t!i bundle o% good

=
1
1
l
h
hj h
y p ) 5e dedu&e %rom t!i ma#imiation program t!e e#preion o% t!e pri&e o% t!e
&ompoite good in %un&tion o% t!e pri&e o% good

=
+ +
=
1
1
1
1 1
0
l
h
h hj j
j j
p p

) 5e alo get t!e

produ&tion o% ea&! good in %un&tion o% t!e produ&tion o% t!e &ompoite good and o% t!eir
relati"e pri&e
( )
j
j h j hj hj
p p y y

0 0
/ =
)
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3e&ondl$( t!e produ&tion o% &ompoite good b$ %irm j i a CE3 %un&tion( 0it! ubtitution
elati&it$ j 1

( o% an intermediar$ &onumption in a compo$ite good and o% t!e added "alue

o% t!e %irm
( )
j j j j j
j j j j j
%a a ci a y
1 1 1 1 1
/ 1 1 / 1
1
/ 1 1 / 1
1
/ 1 1
0
1

+ = ) /!e %irm et t!e le"el o% it
intermediar$ &onumption and it added "alue to minimie it &ot j %a j ci
%a p ci p
j j
+
) 5e
dedu&e %rom t!i minimiation program t!e e#preion o% t!ee t0o "ariable
( )
j
j
ci j j j j
p p y a ci
1
/
0 0 1

=
and
( ) ( )
j
j
%a j j j j j
p p y a a %a
1
/ 1
0 0 1 1

=
) 5e alo get a relation bet0een
t!e pri&e o% t!e &ompoite good and t!e pri&e o% it t0o &omponent
( )
j
j
j
j
j
%a j ci j j
p a p a p
1 1 1
1
1
1
1
1
0
1

+ =
)
2inall$( t!e intermediar$ &onumption o% &ompoite good j i aumed to be a CE3 %un&tion(
0it! ubtitution elati&it$ j 2

( o% t!e intermediar$ &onumption hj

ci
o% t!e
1
l
good) 5e
dedu&e %rom t!e minimiation o% t!e &ot o% produ&ing t!i &ompoite good
( )
j
j
h ci j hj hj
p p ci b ci
2
/

=
and

=

=
1
1
1
1
2
1
1 1
l
h
h hj ci
j j
j
p b p

( 0it!

=
=
1
1
1
1
l
h
hj
b
)
/!e te&!nique o% neted CE3 or CE/ %un&tion !a allo0ed u to model t!e multi9good
produ&tion o% a %irm and to &ompute it intermediar$ &onumption in a more general and
%le#ible 0a$ t!an b$ uing t!e te&!ni&al &oe%%i&ient o% Leontie%) 5e &an noti&e t!at t!e pri&e
o% t!e &ompoite good &an be &omputed %rom t!e pri&e o% t!e good t!emel"e)
5e &ontinue 0it! t!e de&ription o% t!e ret o% t!e produ&tion ide o% t!e e&onom$
/!e added "alue o% %irm j i a CE3 %un&tion o% an aggregate o% &apital and labour on
one !and( and o% land on t!e ot!er !and( ued b$ t!i %irm)
/!e aggregate o% &apital and labour i a CE3 %un&tion o% an aggregate o% &apital and
'illed labour on one !and( and o% un'illed labour on t!e ot!er !and( ued b$ %irm j.
/!e aggregate o% &apital and 'illed labour i a CE3 %un&tion o% aggregate &apital and
o% 'illed labour ued b$ %irm j
/!e aggregate &apital i itel% a CE3 %un&tion o% t!e "ariou 'ind o% &apital ued b$
%irm j.
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/!e pri&e o% t!e aggregate or &ompoite &ommoditie &an be &omputed %rom t!e pri&e o%
&ommoditie (good( &apital( land and labour)) Capital( land and labour are o0ned b$
!oue!old( and t!eir a"ailable quantitie are e#ogenoul$ et (t!e$ are &omponent o% "e&tor

))
Let u turn to t!e pe&i%i&ation o% !oue!old be!a"iour) 1oue!old i o0n gi"en amount o%
!are o% %irm t!at i o% t!eir pro%it) 1e alo o0n e#ogenoul$ gi"en quantitie o% &apital(
land and labour( 0!i&! !e rent to %irm) 1i dipoable in&ome i t!e um o% !i pro%it and
rent (in&luding 0age)) 1e a"e a proportion
i
$
o% !i in&ome and pend t!e ret on
&onumption) /!e allo&ation o% !i &onumption pending a&ro t!e "ariou good &an be
determined b$ a linear e#penditure $tem (LE3)( 0!i&! i deri"ed %rom a 3tone9Gear$ utilit$
%un&tion> t!e pending on ea&! good i t!e um o% t!e "alue o% a ubiten&e minimum in t!i
good and o% a !are o% upernumerar$ in&ome (ubtra&ting a"ing and aggregate
e#penditure on t!e ubiten&e minima %rom dipoable in&ome))
1oue!old a"ing i equal to t!e "alue o% total in"etment) /otal in"etment i a CE3 %un&tion
o% t!e in"etment in t!e di%%erent good)
1.&. From a mathematical to a computable general equilibrium model !! 'alibration and
$imulation
4e&aue o% t!e limit o% e&onomi& ober"ation( 0e &annot in&lude in an applied model all t!e
&ommoditie( %irm and !oue!old e#iting in an e&onom$) 5!at 0e 0ill &all a &ommodit$
in t!e ret o% t!e &!apter 0ill in %a&t be an aggregate o% elementar$ &ommoditie) 2or intan&e
manu(acture o( machinery and equipment 0ill in&lude di!0a!er ued b$ !oue!old and
ma&!ine tool ued b$ %irm) /!i raie t!e problem t!at t!e &ompoition o% t!i aggregate in
elementar$ &ommoditie( di%%er 0!en it i relati"e to produ&tion( &onumption or in"etment)
6 (not entirel$ &on"in&ing) olution i to &onider t!e aggregate &ommoditie de%ined at t!e
produ&tion le"el( a re%eren&e) /!en( 0e aume t!at ea&! aggregate &ommodit$ de%ined at
t!e &onumption (in"etment) le"el i a CE3 %un&tion o% t!e %ormer aggregate) 3imilarl$(
%irm are ubtituted b$ indutrie and !oue!old b$ &lae o% !oue!old( %or intan&e
middle9in&ome %armer)
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6 CGE model in&lude t0o 'ind o% parameter> &ale and !are parameter u&! a hj

or
hj
b
and elati&itie u&! a j

or j 1

) /!e e&ond parameter are aigned "alue baed on

literature ear&!( in general t!e reult o% e&onometri& tudie) /!e "alue o% t!e %irt
parameter are &omputed o t!at t!e model &an reprodu&e t!e ober"ed e&onomi& ituation in
a bae $ear) /!i ober"ed ituation !a been regitered in a o&ial a&&ounting matri# (36;)(
0!i&! in&lude mu&! detailed and &onitent in%ormation)

6 0e a0 in paragrap! 1)1( 0e &an um up t!e model b$ a $tem o% l mar'et equilibrium
equation 0it! l un'no0n pri&e) 1o0e"er( t!e equation are not independent be&aue o% t!e
5alra< identit$( and a &ommodit$ or bundle o% &ommoditie mut be ta'en a numeraire and
!a"e it pri&e et to one. /!i reult !a t!e important impli&ation t!at t!e di%%i&ult$ in
imulating t!e model i related to t!e number o% it &ommoditie but not to t!e number o% it
agent) /!u( i% 0e ubtitute a &la o% !oue!old (%or intan&e t!e medium9in&ome %armer)
b$ a 0ide ample o% !oue!old belonging to t!i &la and 0!oe &!oi&e 0ere regitered b$
a !oue!old ur"e$( 0e do not ma'e t!e imulation o% t!e model more &omple# and 0e add
realim to it) /!i i t!e bai& prin&iple o% mi&ro9imulation) ?er$ e%%i&ient imulation
met!od !a"e been de"eloped and in&orporated in &omputer o%t0are u&! a G6;3)
1.). *er$atility o( '+, model$
6 CGE model i a "er$ "eratile tru&ture( 0!i&! &an eail$ be adapted to man$ problem)
5e &an add plent$ o% diaggregation to t!e pe&i%i&ation o% t!e pre"iou paragrap!( %or
intan&e o% land or labour( b$ t!e introdu&tion o% ot!er CE3 %un&tion) /!e produ&tion
%un&tion &an in&lude %irm9pe&i%i& reour&e( 0!i&! allo0 %or de&reaing return to &ale) @r
t!e$ &an in&lude %i#ed &ot( 0!i&! allo0 %or in&reaing return to &ale) 5e &an aume
monopoliti& &ompetition bet0een t!e %irm in t!e ame indutr$) 1oue!old &an dedu&e
t!eir uppl$ o% labour %rom t!e ma#imiation o% t!eir utilit$ %un&tion) 2irm &an retain a !are
o% t!eir pro%it) /!eir %inan&ing &an pro&eed t!roug! %inan&ial mar'et or ban') /!e labour
mar'et &an be egmented bet0een indutrie( urban and rural area or region) /!en(
migration &ot pre"ent per%e&t and intantaneou arbitrage bet0een t!e 0age o% 0or'er
0it! t!e ame 'ill but 0or'ing in di%%erent indutrie) 5age &an be bounded %rom under b$
a legal minimum 0age) 8% it i abo"e t!e equilibrium 0age %or ome 'ill( t!e 0or'er 0it!
t!ee 'ill 0ill partl$ be unemplo$ed) Et&)
JPL Page , 07/05/2014
5e !a"e aumed t!at t!e allo&ation o% labour( &apital and land bet0een %irm (or indutrie)
&an &!ange 0it!out &ot) 5e &an &onider t!at under t!i aumption t!e model determine a
medium-run equilibrium) 6 $hort-term equilibrium &an be de%ined b$ t!e aumption t!at
&apital and land &annot mo"e bet0een %irm (indutrie))
5e !a"e aumed until no0 t!at t!e a"ailable amount o% &apital i predetermined) 8n t!e bai&
"erion o% t!e model( in"etment i equal to !oue!old< a"ing) /!i pe&i%i&ation &an be
impro"ed b$ ta'ing into a&&ount %irm( Go"ernment and %oreign a"ing) /!en( t!e model &an
be d$nami&all$ imulated under t!e aumption t!at t!e &apital a"ailable in t!e ne#t period i
equal to t!e &apital o% t!e &urrent period( plu in"etment and le depre&iation) /!e long-run
equilibrium o% t!e model &an be de%ined a t!e balan&ed gro0t! pat! o% t!i d$nami&)
2. Extensions and questions
/!e 5alraian model( in it 6rro09-ebreu "erion( !a neit!er international trade nor
Go"ernment) 6pplied model mut in&lude t!ee t0o %eature) 5e 0ill !o0 !o0 t!e$ are
introdu&ed in CGE model in t!e t0o %irt paragrap!) 8n t!e lat paragrap! 0e 0ill di&u
t!e trengt! and limit o% t!ee model)

2.1. !nternational trade
/!e pe&i%i&ation o% international trade ret on t!e aumption t!at %oreign and dometi&
good 0it! t!e ame denomination are imper%e&t ubtitute) /!i propert$ &an be %ormalied(
one more time( 0it! neted CE3 and CE/ %un&tion( %or intan&e
/!e !oue!old< &onumption o% good h i a CE3 %un&tion o% nationall$ produ&ed and
o% import o% good h. /!ee import are t!emel"e a CE3 %un&tion o% import %rom
ea&! trading partner o% t!e modelled &ountr$) 6 imilar pe&i%i&ation i ued %or t!e
in"etment and t!e intermediar$ &onumption b$ %irm in good h)
/!e dometi& produ&tion o% good ! i a CE/ %un&tion o% dometi& demand and o%
e#port o% t!i good) /!e e#port o% t!i good are t!emel"e a CE/ %un&tion o% it
e#port to ea&! o% t!e trading partner o% t!e e&onom$)
JPL Page + 07/05/2014
8n bot! &ae t!e %oreign pri&e o% e#port and import in dollar are e#ogenoul$
gi"en) 1o0e"er( 0e &ould intead pe&i%$ t!e demand %un&tion %or good h b$ ea&!
%oreign &ountr$ (%or intan&e b$ &ontant pri&e9elati&it$ %un&tion) and dedu&e it
pri&e on ea&! %oreign mar'et %rom t!e equilibrium bet0een t!e uppl$ and demand o%
t!e e#port o% t!i good on t!i mar'et)
2inall$( t!e "alue o% e#port balan&e t!e "alue o% import or t!e trade balan&e i in
equilibrium) 5e noti&e t!at i% t!e e#&!ange rate and t!e pri&e o% all &ommoditie are
multiplied b$ parameter 0 > ( not!ing ele &!ange in t!e e&onom$) 3o( 0e &an
%reel$ &!ooe a numeraire a in t!e pre"iou e&tion) /!e mot natural &!oi&e i to et
t!e "alue o% t!e nominal e#&!ange rate to one)
5e &an e#tend t!e pe&i%i&ation o% t!e model b$ introdu&ing trade margin and
tranportation &ot in %oreign trade( remittan&e b$ migrant( %oreign &apital in&ome(
%oreign aid( &apital in%lo0( et&)
2.2. +o%ernment
/!e go"ernment &olle&t ta#e and dutie( allo&ate tran%er( &onume and in"et) 8t
introdu&tion in a CGE model i mainl$ an a&&ounting problem) /a#e &reate 0edge bet0een
produ&tion and &onumption pri&e( t!e &ot o% labour to %irm and t!e net 0age per&ei"ed b$
0or'er( t!e &ot o% &apital to %irm and t!e return to in"etment to !oue!old( %oreign and
import pri&e( et&) /!ee 0edge ditort t!e 0or'ing o% mar'et and lead to e%%i&ien&$ loe)
/!e allo&ation o% Go"ernment &onumption and in"etment bet0een t!e "ariou good
dometi&all$ produ&ed or imported %rom di%%erent &ountrie( &an be modelled b$ neted9CE3
%un&tion) /!e balan&e o% t!e budget o% t!e go"ernment i obtained b$ an adAutment o% all or
ome ta#ation rate) @% &oure( t!e model &an alo aume an e#ogenou de%i&it o% t!e
Go"ernment( or &onider all ta#ation rate e#ogenou and t!e de%i&it a endogenou)
2.& -trength$ and limit$ o( '+, model$
6 CGE model de&ribe a 5alraian equilibrium o% an e&onom$ 0it! man$ detail) /!e o&ial
a&&ounting matri# (36;) it i baed on( in&lude a 0ide range o% indutrie and &lae o%
!oue!old( and t!e %i&al poli&$ o% t!e Go"ernment i "er$ detailed) /!u( t!e imulation o%
JPL Page 10 07/05/2014
a CGE model gi"e pre&ie and detailed in%ormation on t!e &!ange in t!e allo&ation o%
reour&e and in t!e ditribution o% in&ome reulting %rom &!ange in t!e en"ironment or t!e
tru&ture o% a &ountr$( or in t!e poli&$ o% it Go"ernment)
/!e %irt limit o% a CGE model i t!at it i eentiall$ tati&) /e&!ni&all$( 0e a0 t!at it &an be
imulated along a d$nami& pat!) 1o0e"er( t!e model in&lude almot none o% t!e d$nami&
be!a"iour and nominal and real rigiditie baed on intertemporal optimiation and t!e
aumption o% rational e#pe&tation) 8n t!at it di%%er %rom t!e re&ent d$nami& general
equilibrium (-GE) model u&! a t!e 8;2 model GE; and G2; (ee 4a$oumi and alii(
2004 and 4otman and alii( 200.)( and t!eir to&!ati& "erion u&! a t!oe b$ 3met and
5outer (200:) or C!ritiano( Ei&!embaum and E"an (2005)) @n t!e ot!er !and( a CGE
model i %it on a bae $ear( but i not e&onometri&all$ etimated) /!u( it &annot reprodu&e t!e
ober"ed pat! o% t!e e&onom$ o"er t!e lat 15 or 20 $ear) 8n t!at( it di%%er %rom traditional
ma&roe&onometri& model u&! a t!e model o% t!e 4an' o% England (2005)) 1o0e"er( -GE
and ma&roe&onometri& model are mu&! le detailed t!an CGE model> t!e$ in&lude a "er$
mall number( o%ten onl$ one( o% good( e&tor and &lae o% !oue!old) /!u( t!e$ &annot
&ompl$ 0it! t!e main miion o% CGE model)
/!e e&ond limit o% CGE model &ome %rom t!eir 5alraian %eature) /!e e%%e&t o% a big
re%orm &an !a"e man$ maAor impli&ation beide a &!ange in t!e allo&ation o% &ar&e
reour&e bet0een indutrie) 2or intan&e( a poli&$ de"eloping tourim 0ill en&ourage
dometi& reident to learn %oreign language and to in"et in edu&ation( 0ill de"elop
international buine net0or'( 0ill en&ourage t!e di%%uion o% international 'no0ledge and
te&!nolog$( 0ill in&reae e%%i&ien&$ in t!e er"i&e indutr$( et&) 5e a0 t!at CGE model are
"eratile enoug! to be able to in&lude non 5alraian me&!anim) 1o0e"er( i% 0e go too %ar
in t!i dire&tion 0e 0ill in&lude in t!e model more and more ad hoc and !ardl$ meaurable
me&!anim( and 0ill poil t!e &larit$ and &redibilit$ o% t!e model)
Let u be more pe&i%i&) 8% 0e ue a CGE model to &ompute t!e e%%e&t o% a radi&al re%orm o%
t!e ta# or trade prote&tion $tem( 0e get t!e diappointing reult t!at t!e G-P or t!e total
!oue!old< &onumption in&reae b$ a mall amount( o%ten le t!an 1 per &ent o% G-P) /!e
reaon i t!at t!e ine%%i&ien&ie reulting %rom t!e bad allo&ation o% &ar&e reour&e are
limited( at leat in a neo&lai&al etting) 1o0e"er( t!e interet o% a CGE model i not o mu&!
in &omputing t!e aggregated e%%e&t o% t!ee re%orm t!an in meauring t!e allo&ation o% t!eir
JPL Page 11 07/05/2014
e%%e&t a&ro indutrie (t!oe( 0!i&! e#pand and t!oe( 0!i&! &ontra&t) and t!e &!ange in
in&ome ditribution and po"ert$) /!e e&onomi& meaning o% &!ange in aggregated "alue in a
diaggregated model i ambiguou be&aue( ultimatel$( 0e &an &ompute t!e &!ange in
0el%are o% ea&! &la o% !oue!old( but 0e !a"e no 0a$ o% aggregating t!em)
/!e t!ird limit o% CGE model &ome %rom t!eir &alibration( epe&iall$ %rom t!e di&retionar$
&!oi&e b$ t!e model9builder o% t!e "alue o% t!e elati&it$ parameter) /!e aut!or o% a CGE
model uuall$ ma'e a eniti"it$ anal$i o% t!eir model> !o0 t!e reult o% imulation
&!ange 0it! t!e "alue o% elati&it$ parameter) /!e reult o% t!i anal$i are o%ten
en&ouraging and gi"e t!e impreion t!at t!e model i robut) 1o0e"er( t!e reult o%
imulation &an be mu&! more eniti"e to t!e pe&i%i&ation o% t!e model itel%( epe&iall$ t!e
tru&ture and !ierar&!$ o% t!e neted CE/ and CE3 %un&tion) /!e$ &ontrain a lot t!e
elati&it$ o% ubtitution bet0een good and %a&tor( and t!at in a 0a$( 0!i&! !a more
te&!ni&al t!an e&onomi& Auti%i&ation)
. !o" to introduce tourism in a general equilibrium model
/ourim i not an indutr$ per $e but a &olle&tion o% interrelated indutrie( 0!i&! ell
produ&t to tourit a 0ell a to a range o% ot!er &utomer> !otel( tour operator and tra"el
agent( airline( et&) /!u( introdu&ing tourim in a 36; matri# a' %or pre&ie in%ormation
on tourim demand and t!e 0a$ it i er"ed b$ t!ee indutrie) /!i in%ormation i not part o%
national a&&ount and t!i de%i&ien&$ e#plain 0!$ CGE model !a"e been applied to t!e
in"etigation o% t!e e%%e&t o% &!ange in tourim demand or to t!e e"aluation o% tourim
poli&ie( onl$ re&entl$ and in a limited number o% &ountrie (u&! a 6utralia( 8ndoneia(
3pain( t!e Bnited Cingdom and t!e Bnited 3tate))
/!e building o% 36; matri&e in&luding tourim a&ti"itie and t!e appli&ation o% CGE model
to tourim e&onomi&( !a"e re&entl$ be&ome eaier 0it! t!e de"elopment o% /ourim 3atellite
6&&ount (/36)) /!ee a&&ount !a"e been et up in 2000 b$ an 8ntere&retariat 5or'ing
Group &on"ened b$ t!e Bnited Dation 3tatiti& -i"iion (BD3-)( 0it! t!e parti&ipation o%
3tatiti&al @%%i&e o% t!e European Communit$ (EB*@3/6/)( t!e @rganiation %or E&onomi&
Co9operati"e -e"elopment (@EC-) and t!e 5orld /ourim @rganiation (BD5/@) (ee %or
intan&e BD3-( EB*@3/6/( @EC- and BD5/@( 200,)) 8n 2007( more t!an 70 &ountrie
JPL Page 12 07/05/2014
%rom all part o% t!e 0orld and di%%erent degree o% de"elopment 0ere in"ol"ed in etting up a
/36)
/!e purpoe o% a tourim atellite a&&ount i to anal$e in detail all t!e ape&t o% demand %or
good and er"i&e ao&iated 0it! t!e a&ti"it$ o% "iitor( to ober"e t!e operational inter%a&e
0it! t!e uppl$ o% u&! good and er"i&e 0it!in t!e e&onom$E and to de&ribe !o0 t!i
uppl$ intera&t 0it! ot!er e&onomi& a&ti"itie) /ourim a a demand ide p!enomenon re%er
to t!e a&ti"itie o% "iitor( and t!eir role in t!e a&quiition o% good and er"i&e) 8t &an alo
be "ie0ed %rom t!e uppl$ ide and tourim 0ill t!en be undertood a t!e et o% produ&ti"e
a&ti"itie t!at &ater mainl$ to "iitor) 6 "iitor i a tra"eler ta'ing a trip to a main detination
outide !i/!er uual en"ironment %or le t!an a $ear and %or an$ main purpoe (buine(
leiure or ot!er peronal purpoe) ot!er t!an to be emplo$ed b$ a reident entit$ in t!e
&ountr$ or pla&e "iited) /ourim i di"ided into dometi& tourim b$ reident and %oreign
tourim made b$ non reident) /!e &onumption o% %oreign tourit repreent tourim
e#port( tourim import being &onumption o% o"erea produ&ed good and er"i&e b$
reident on o"erea trip)
/!e &omplete /36 pro"ide>
;a&roe&onomi& aggregate t!at de&ribe t!e i7e and t!e e&onomi& &ontribution o%
tourim( u&! a tourim dire&t gro "alue added and tourim dire&t gro dometi&
produ&t( &onitent 0it! imilar aggregate %or t!e total e&onom$( and %or ot!er
produ&ti"e e&onomi& a&ti"itie and %un&tional area o% interetE
-etailed data on tourim &onumption and a de&ription on !o0 t!i demand i met b$
dometi& uppl$ and import( t!at &an be &ompiled bot! at &urrent and &ontant pri&eE
-etailed produ&tion a&&ount o% t!e tourim indutrie( in&luding data on emplo$ment(
lin'age 0it! ot!er produ&ti"e e&onomi& a&ti"itie and gro %i#ed &apital %ormationE
6 lin' bet0een e&onomi& data and non9monetar$ in%ormation on tourim( u&! a
number o% trip (or "iit)( duration o% ta$( purpoe o% trip( mode o% tranport et&)
0!i&! are required to pe&i%$ t!e &!ara&teriti& o% t!e e&onomi& "ariable)
/!e 6utralian 4ureau o% 3tatiti& (200,) and ?an 1o and alii (200,) preent a good
e#ample o% a /36 %or 6utralia in 200.92007) /!e$ gi"e %or ea&! tate o% 6utralia( "ariou
meaure o% t!e a&ti"itie o% t!e e&tor produ&ing tourim good and er"i&e (output( gro
JPL Page 1: 07/05/2014
"alue added( gro dometi& produ&t and emplo$ment)( tourim &onumption and tourim
intertate trade) /!e /36 i diaggregated b$ indutrie or produ&t u&! a long ditan&e
paenger< tranportation or a&&ommodation er"i&e) 8t alo in&lude t!e in&ome
&omponent o% tourim (&ompenation o% emplo$ee( gro operating urplu) b$ indutrie)
5e &an noti&e t!at in 6utralia dometi& tourim &onumption i about t!ree time larger t!an
%oreign tourit< &onumption) /!ee dire&t meaure o% t!e output o% tourim a&ti"itie are
upplemented b$ indire&t meaure &omputed 0it! an input9output table)
6 CGE model in&luding tourim mut eparate dometi& and %oreign tourim) 2oreign tourit
"iit a &ountr$ (tate( pro"in&e) %or a limited duration o% time and &onume in t!i &ountr$)
/!i inbound tourim i "er$ imilar to t!e e#port o% good and er"i&e) 8n a imilar 0a$
outbound tourim( reident 0!o "iit %oreign &ountrie and &onume in t!ee pla&e( i "er$
imilar to import) /!e model 0ill in&lude one or e"eral &la o% non reident tourit( 0it!
t!eir total pending and t!eir utilit$ %un&tion( beide reident !oue!old)
-ometi& tourim i a &onumption a&ti"it$ o% reident !oue!old) /!i a&ti"it$ &an be
pe&i%ied a a ne0 tage in a $tem o% neted utilit$ %un&tion or e#penditure $tem o% t!ee
!oue!old) 8n ummar$ t!e 36; matri# o% t!e model 0ill in&lude t0o more a&ti"itie t!an
uual( pri"ate e#penditure o% dometi& tourit and o% %oreign tourit( beide pri"ate
&onumption( in"etment( e#port( et&) /!ee a&ti"itie 0ill in&lude t!e e#penditure o%
%oreign and dometi& tourit on ea&! good and er"i&e)
6 lat problem i t!e %ore&at o% t!e number o% tourit b$ 'ind (buine( $mpoium(
leiure) or origin (%oreign or dometi&) and o% t!eir pending b$ great &ategorie (tranport to
t!e &ountr$( a&&ommodation( et&)) under "ariou aumption on en"ironment &!ange)
3in&lair( 4la'e and 3ugi$arto (200:) e#plain in t!eir ur"e$ t!at t!e bet e&onometri&
etimation on t!e demand o% tourim ue 6lmot 8deal -emand 3$tem (68-3) or Linear
E#penditure 3$tem (LE3) to e#plain t!e !are o% detination i in t!e 0orld (or regional)
total pending on tourim in %un&tion o% t!i pending and o% t!e pri&e o% ea&! detination)
/!e interet o% t!ee $tem i to pe&i%$ in a &onitent 0a$ t!e &ompetition bet0een
detination on t!e 0orld (or on a regional) mar'et o% tourim) /!e etimated "alue o% t!e
pri&e elati&itie are e#tremel$ ue%ul %or t!e etting o% tourim pri&ing and ta# poli&ie tr$ing
to e#tra&t rent %rom %oreign tourit) /!e allo&ation o% total tourit< pending in a detination
bet0een t!e "ariou good and er"i&e &an be pe&i%ied b$ a e&ond LE3)
JPL Page 14 07/05/2014
#. $pplications of CGE models to tourism economics
/!i e&tion 0ill preent a ele&tion o% appli&ation o% CGE model to e&onomi& problem
&onne&ted to tourim) 6n interet o% t!ee appli&ation i t!at t!eir general equilibrium
approa&! lead to reult t!at &annot be rea&!ed b$ partial e&onomi& model or t!at e"en
&ontradi&t t!e reult o% t!ee model) /!e mot intereting general equilibrium me&!anim in
t!i &onte#t i t!e Coppeland e%%e&t (1++1( %or a di&uion ee 1a7ari and 3gro( 2004))
2oreign tourit allo&ate a !ig! proportion o% t!eir total pending to t!e &onumption o% non9
traded good and er"i&e) /!eir a&tion in&reae t!e pri&e and output o% t!ee good( 0!i&!
lead to a &ontra&tion o% t!e traded good e&tor) /!u( an e#panion o% %oreign tourim in a
&ountr$ generate a 'ind o% -ut&! dieae( 0it! e%%e&t imilar to t!oe reulting %rom an
in&reae in t!e pri&e o% an e#portable &ommodit$) 1o0e"er( a noted b$ 4la'e (200,b)( t!e
imilarit$ end t!ere) /!e natural reour&e &ure( t!e %a&t t!at natural reour&e e#tra&tion
eem to lead to lo0 gro0t! le"el( doe not e#tend to tourim> none o% t!e "er$ poor
per%orming e&onomie in t!e 0orld !a"e relied on tourim)
6 &onequen&e o% t!i me&!anim i t!at( a oon a %oreign tourit< &onumption o% non9
traded good !a %inite pri&e elati&it$( t!e go"ernment !a a monopol$ po0er on t!e mar'et
o% t!ee good) /!i po0er &an be ued to e#tra&t a rent %rom international tourit b$ ta#ing
t!eir &onumption or more 0idel$ t!e good t!e$ &onume (o a part o% t!e ta# i paid b$ t!e
reident 0!o alo &onume t!ee good)) E"aluation o% t!i poli&$ 0ill be e#amined in t!e
%irt paragrap!)
8 an e#panion o% tourim in a de"eloping &ountr$ good or bad %or it reident= 8n paragrap!
2 0e 0ill preent ome reult on t!i old quetion( bearing on t!e e%%e&t o% tourim on
po"ert$) 5e 0ill ee t!at all depend i% t!e poor 0or' in tourim e&tor( 0!i&! e#pand( or in
e#port e&tor( 0!i&! &ontra&t)
/!e e%%e&t o% tourim on a large &ountr$ &an be une"enl$ ditributed a&ro it region) 5e
0ill ee in paragrap! : t!at tourim in 6utralia !a a negati"e e%%e&t on t!e tourit tate o%
Fueenland( and bene%it to t!e tate o% ?i&toria) /!i reult till &ome %rom t!e -ut&!
dieae e%%e&t indu&ed b$ tourim) /!e lat paragrap! preent e"aluation o% go"ernment
JPL Page 15 07/05/2014
poli&ie de&ided in time o% a natural &atatrop!e (u&! a t!e %ood and mout! dieae in t!e
BC) or a%ter a terrorit atta&' (3eptember 11))
).1. .axing (oreign touri$t$
4la'e (2000) de"elop a model o% t!e 3pani! e&onom$) 1e !o0 t!at %oreign tourim
a&ti"itie in 3pain are( relati"el$ to ot!er e&tor( !ig!l$ ta#ed but t!at dometi& tourim i
e%%e&ti"el$ ubidied) /!i di%%eren&e in ta#ation i largel$ be&aue dometi& tourit are
more inteni"e uer o% land tranport) /!i e&tor i ubidied( parti&ularl$ %or rail tranport
0!ere %or e"er$ 100 peeta paid b$ paenger an additional 102), peeta are paid in (net)
ubid$)
*aiing t!e le"el o% ta#ation on %oreign tourim 0ill( !o0e"er( in&reae dometi& 0el%are
in&e t!ee tourit bear mot o% t!e 0el%are lo ao&iated 0it! !ig!er re"enue) 6 Gper%e&tH
tourim ta#( !ould ta# t!e &onumption o% all t!e good boug!t b$ %oreign tourim and onl$
t!oe good) @% &oure t!i t$pe o% ta# i un0or'able) 4la'e %ind t!at an$ o% t!e ta#e on
tourim e&tor (0!i&! are in part paid b$ dometi& reident 0!o bu$ t!e good produ&ed b$
t!ee e&tor) impro"e t!e 0el%are o% dometi& reident to a %ar maller e#tent t!an a per%e&t
tourim ta#) 1e alo %ind t!at t!e 0el%are bene%it %rom ta#ing tourim are more eniti"e to
aumption relating to ta# !andle t!an t!e$ are to t!e elati&it$ o% demand %or tourim)
Gooroo&!urn and 3in&lair (2005) ma'e a imilar tud$ in t!e &onte#t o% t!e tourim9
dependent e&onom$ o% ;auritiu) 6 4la'e t!e$ %ind t!at dire&tl$ ta#ing %oreign tourit
in&reae dometi& 0el%are) /!e aut!or alo e#amine produ&tion and ale ta# re%orm and
&ompare t!e 0el%are &ot o% raiing additional re"enue %rom a ta# on a pe&i%i& &ommodit$
0!ile ot!er ta#e remain &ontant) /!e$ %ind t!at tourim9related e&tor (retaurant/!otel
and tranport/&ommuni&ation) are underta#ed( t!at t!e &ot o% in&reaing t!e ta#ation o% t!ee
e&tor 0ould be mainl$ born b$ %oreign tourit and t!at in&reaing ta#e in t!ee e&tor !a
maller e%%e&t on poorer t!an on ri&!er !oue!old and redu&e in&ome inequalit$ /!e main
dri"er o% t!e lat reult i t!e !ig!er proportion o% dometi& &onumption %rom t!e ri&!er
!oue!old group %or tourim9related e&tor) 6 narro0 poli&$( ta#ing t!e !ig!l$ tourim9
inteni"e e&tor e#tra&t igni%i&antl$ more re"enue %rom tourit t!an a broader poli&$
0!ere all tourim9related e&tor are ta#ed) /!e narro0 poli&$ !a a !ig!er bene%i&ial term o%
JPL Page 1. 07/05/2014
trade e%%e&t t!an t!e broader poli&$) 1ig!er term o% trade implie t!at t!e lo&al e&onom$ &an
obtain more import (!en&e &onumption) %or a gi"en amount o% e#port)
).2. .ouri$m and po%erty
4la'e( 6rba&!e( 3in&lair and /ele (2007) e#amine t!e iue o% !o0 tourim a%%e&t po"ert$
in 4ra7il) /!e$ !o0 t!at t!e e%%e&t on all in&ome group are poiti"e) /!e lo0et in&ome
!oue!old bene%it( but b$ le t!an ome !ig!er in&ome group)
/ourim &onumption uuall$ lead to in&reaed output( pri&e and 0age in t!e indutrie
t!at ell produ&t dire&tl$ to tourit) /!ere%ore( poor !oue!old are li'el$ to be negati"el$
a%%e&ted "ia t!e pri&e &!annelE riing pri&e 0ill redu&e t!e real in&ome e%%e&t) /!e larget
in&reae in pri&e t!at reult are( in general( %or t!e t$pe o% good and er"i&e t!at tourit
&onume) /!ee are produ&t t!at dometi& reident onl$ uuall$ &onume i% t!e$ ta'e a trip
(a&&ommodation( paenger tranport( tour agen&$ and operation er"i&e( re&reational
er"i&e( and ou"enir good)( i% t!e$ go to retaurant or i% t!e$ bu$ %ood produ&t) ;ot
produ&t are t!oe pur&!aed more b$ !ig!er in&ome !oue!oldE t!e dire&t e%%e&t o% t!e
&!annel 0ill lead to mall in&reae in pri&e paid b$ poor !oue!old( t!roug! %ood produ&t)
E"en in t!i &ae( tourit tend to bu$ a di%%erent et o% %ood %rom t!oe &onumed b$ poor
!oue!old)
Poor !oue!old &an bene%it %rom t!e !ig!er 0age and in&reae in produ&tion in tourim9
related indutrie) /!i e%%e&t mig!t be moderate( !o0e"er( i% t!e poor !oue!old la&' t!e
'ill required %or emplo$ment in t!ee buinee) 6n o%%etting earning e%%e&t &ome %rom
t!e %all in produ&tion and 0age in traditional e#port e&tor) 6n ad"ere ape&t o% tourim
e#panion i t!at i% t!e poor rel$ !ea"il$ on earning %rom &ommodit$ e#port e&tor( an
in&reae in tourim demand ma$ lead to an in&reae in po"ert$)
/ourim &onumption (%or e#ample dometi& tourim) i mainl$ &on&entrated upon t!e
0ealt!iet e&tion o% o&iet$) @n t!e ot!er !and( t!e remuneration o% !oue!old t!roug! t!e
indutr$ i in&reaingl$ &on&entrated( in relati"e term( to0ard t!e lo0et9 and lo09 in&ome
!oue!old) /!ee data ugget a ditribution o% in&ome %rom t!e ri&!et( t!roug!
&onumption( to t!e pooret( t!roug! remuneration) 8t i notable t!at t!e larget inter9
!oue!old %lo0 are %rom !ig!9to lo09in&ome !oue!old( but not to t!e lo0et in&ome one)
JPL Page 17 07/05/2014
2inall$( in 4ra7il 0!ile t!e poor do not bene%it greatl$ %rom tourim( t!e$ are not !ea"il$
in"ol"ed in ot!er e#porting e&tor( o do not loe out) 8n Cen$a( /an7ania and Bganda( t!e$
re&ei"e more in&ome %rom non9er"i&e e#port (u&! a &o%%ee and tea) t!an t!e$ do %rom
tourim (or( t!e !otel and retaurant e&tor( 4la'e( 200,a)) /!e &on&luion !a to be t!at
tourim &an ma'e t!e poor 0ore o%%( 0!i&! i a reult t!at 5attana'ulAaru and Ci#!ead
(200,) obtain %or /!ailand)
).& !nterregional e((ect$
6dam and Parmenter (1++:( 1++5) in"etigate t!e e%%e&t o% a general timulation o%
international tourim in 6utralia( 0it! t!e @*6D8 model) 5it! timulation o% international
tourim( t!ere i a trengt!ening o% t!e e#&!ange rate) /!i mo"ement lead to import
ubtitution and t!e &ontra&tion o% traditional e#port e&tor o% mining and agri&ulture 0!i&!(
0it! t!e !ig! import &ontent o% t!e tourim e&tor( &aue t!e balan&e o% trade to 0oren)
3ome e&tor e#perien&e dire&t timulation (air tranport( retaurant and !otel)( ot!er
e#perien&e indire&t timulation due to t!e riing pri&e o% intermediar$ input upplied to t!e
tourim e&tor (%ood( &lot!ing) and ot!er &ontra&t a t!e reult o% ad"ere e#&!ange rate
e%%e&t)
/!e aut!or etabli! t!at Fueenland (6utralia< un!ine tate and t!e main detination o%
man$ %oreign tourit) 0ould be a mall loer) Certainl$( international tourit pend mone$ in
Fueenland( alt!oug! not a mu&! a one mig!t belie"e be%ore loo'ing at t!e rele"ant
tatiti&) 6lt!oug! man$ tourit tra"el in Fueenland( t!e bul' o% t!eir mone$ i pent in
De0 3out! 5ale( epe&iall$ on airline ti&'et %or %lig!t in and out o% 3$dne$) /!u( t!e
Fueenland e&onom$ e#perien&e moderate onl$ gain %rom t!e e#penditure o% international
tourit)
/!e do0nide %or Fueenland &ome %rom t!e trade a&&ount) /!e appre&iation o% t!e
e#&!ange rate ad"erel$ impa&t on e#port9oriented a&ti"itie in&luding mining and
agri&ulture) 5it! t!ee a&ti"itie repreenting a &omparati"el$ large !are o% it gro tate
produ&t( Fueenland i le%t a a net loer %rom general tourim timulation) ?i&toria( 0it! little
relian&e on traditional e#port and 0!ere one o% t!e &ountr$< prin&ipal airport i lo&ated(
e#perien&e t!e larget e#panion)
JPL Page 1, 07/05/2014
).). -tabili$ing policie$ in time$ o( natural cata$trophe and terrori$m

4la'e( 3in&lair and 3ugi$arto (200:) e"aluate t!e BC go"ernment< poli&$ to0ard %ood and
mout! dieae (2;-) in t!e BC) /!e BC go"ernment de&ided t!e laug!tering o% animal
t!at 0ere deemed to !a"e or be at !ig! ri' o% !a"ing t!e dieae to top t!e "iru preading(
0it! &ompenation pa&'age %or %armer 0!oe li"eto&' 0a laug!tered) 8t alo in&luded
banning a&&e to large area in t!e &ountr$ide t!at in&lude !itori& ite and tourit
attra&tion and &an&elling or potponing port and publi& e"ent) /!e aut!or etabli! t!at
t!e 2;- !ad mu&! larger ad"ere e%%e&t on tourim( dometi& and %oreign( t!an on
agri&ulture( t!e main reaon being t!at tourim i a &oniderabl$ larger e&tor to tart 0it!)
;ot o% t!e redu&tion in G-P due to t!e 2;- &rii %rom 2001 to 2004 &ame %rom tourim
e#penditure redu&tion) /!e larget redu&tion in tourim e#penditure o&&urred in 3&otland
and London)
/!e BC go"ernment &ould !a"e %ollo0ed alternati"e poli&ie) @ne option 0ould !a"e been to
"a&&inate u&eptible animal againt 2;-) ?a&&ination 0ould not eradi&ate t!e dieae and
ma$ reult in a permanent redu&tion o% meat and mil' produ&ti"it$ and e#port) 1o0e"er( t!i
lo 0ould !a"e a%%e&ted %armer( a mall !are o% t!e BC population( but upported b$
po0er%ul lobbie) 6n alternati"e 0ould !a"e been to allo0 in%e&ted animal to re&o"er %rom
t!e dieae a +5I o% t!e a%%e&ted animal re&o"er 0it!in t0o 0ee' (0it! little or no
treatment) and t!ere i "irtuall$ no ri' to !uman !ealt!)
4la'e and 3in&lair (200:) e"aluate t!e B3< go"ernment repone to t!e e"ent o% 3eptember
11) 6irline indutrie 0ere epe&iall$ !it 0it! a de&reae in t!e number o% paenger o%
:4I %or dometi& and 2:I %or international tra"el in @&tober 2001) 4$ June 2002 ome
re&o"er$ !ad ta'en pla&e( 0it! emplanement do0n b$ 11I and 7I repe&ti"el$ o"er t!e
pre&eding 12 mont!) /!e ot!er a&ti"itie( 0!i&! pro"ide er"i&e to tourit( but to ot!er
agent a 0ell( &ould de%ue part o% t!e !o&')
/!e poli&$ o% pro"iding go"ernment loan and &ompenation to airline( a 0ell a ot!er
%inan&ial and a%et$ meaure( !a been mu&! more e%%e&ti"e t!an alternati"e poli&ie a'ed
b$ t!e tourim< indutr$ o% ta# &redit %or tra"el and %or t!e 0or'%or&e emplo$ed in t!e
indutr$( buine loan program( t!e e#tenion o% allo0an&e %or net operating loe and
JPL Page 1+ 07/05/2014
go"ernment and pri"ate e&tor %unding %or ad"ertiing to timulate tra"el to and in t!e Bnited
3tate) /!e intuition be!ind t!i reult i t!at a tabiliing poli&$ o% a !arp but lo&alied and
relati"el$ !ort9li"ed &rii i more e%%i&ient i% it target to t!e %e0 e&tor( 0!i&! !a"e been
erioul$ !it( rat!er t!an i% it allo&ate it mean bet0een a large number o% re&ipient( 0!i&!
&an 0allo0 t!e !o&' 0it!out too mu&! di%%i&ult$)
%. Conclusion
CGE model are an in"aluable met!od to e"aluate t!e e%%e&t o% !o&' and o% poli&ie at a
mu&! diaggregated le"el) /!e$ !a"e no eriou ri"al( 0!i&! &an determine 0!i&! e&tor 0ill
e#pand and 0!i&! 0ill &ontra&t( and 0!i&! &lae o% !oue!old 0ill ee an impro"ement in
t!eir 0el%are and 0!i&! 0ill u%%er deterioration o% it)
5e a0 t!at t!e tru&ture o% t!ee model( baed on a equen&e o% neted CE3 or CE/
%un&tion( &an mu&! &ontrain t!e ubtitution elati&itie bet0een good 0it!out mu&!
e&onomi& Auti%i&ation) /!i 'ind o% impli%i&ation i t!e pri&e to pa$ i% 0e 0ant to run general
equilibrium imulation) 1o0e"er( t!i limit alo ugget t!at t!ere i till room le%t %or
partial equilibrium anal$i( 0!i&! &an adopt a more %le#ible pe&i%i&ation)
5e alo a0 t!at t!at t!e d$nami& and t!e ma&roe&onomi& o% CGE model are poor) 4ut
again( t!ee 0ea'nee !ould be dealt b$ uing in parallel( aggregated d$nami& general
equilibrium model)
/!e appli&ation o% CGE model to tourim e&onomi& !a been mu&! retrained until re&entl$
b$ t!e la&' o% data) 5e a0 t!at t!e de"elopment o% /36 !a progrei"el$ dampened t!i
di%%i&ult$( and 0e !a"e een more and more o% t!ee appli&ation in t!e re&ent $ear) /!i
trend 0ill &ertainl$ &ontinue)
JPL Page 20 07/05/2014
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