OECD Culture and Local Development.pdf - PACA

Annex 1
CHAPTER 2: LOCAL DEVELOPMENT BASED ON ATTRACTING VISITORS AND
TOURISTS
Effects, spin-offs and impacts
Multipliers
Annex 1.1. The Keynesian-type multiplier
The Keynesian multiplier, k, is formulated in terms of revenues, thus:
k = 1 / 1- c = 1 / s + m
where:
• k represents the value of the multiplier.
• c is the propensity to consume.
• s and m are the propensity to save and propensity to import, i.e. leakages
In fact, we can derive a more complex formula if we think long-term. We will then
have to consider the capital outlays and new public spending that the territory will
require as tourist outlays increase. At that point, we must take account of leakages
through direct and indirect taxes, but we must also add in transfers. If i is the marginal
propensity to invest, g is the marginal propensity of local government to spend (or
consume), t i is the marginal indirect taxation rate, t d is the marginal direct taxation
rate, and b is the marginal rate of transfer, the value of the multiplier k will be:
k = (1 - F) / ( 1 - c(1 - t i ). (1 - t d - b) + m
The term F designates here the initial flow of direct leakages. The long-term
effects will only be felt if the initial flow, net of leaks, is renewed and thus allows investors
and governments to plan for their territories’ development.
CULTURE AND LOCAL DEVELOPMENT - ISBN 92-64-00990-6 - © OECD 2005 177