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in order to determine the total economic impact.
The multiplier effect can be estimated by using
ratios that reflect either the direct plus indirect effects
or the direct plus indirect plus induced economic effects
of tourism spending.
The direct economic effects are those that occur
at front-line tourism-related establishments. Therefore,
when tourists spend their money in hotels,
restaurants, transportation and communication
services and retail outlets, for example, this will
create direct income, output, government revenue
and employment effects, as well as requiring
some direct imports of goods and services. The
direct effects are generally less than the volume of
tourism receipts because of the expenditures that
immediately leak out of the economy under study
�see leakage; economics).
The indirect economic effects are those subsequent
effects as a result of the direct economic
effects. For instance, when the tourist spends
money in a restaurant, the restaurant will spend
some of the money it receives on food and
beverage supplies, some of it on transport, heating
and lighting, accountancy and other business
services, and so on. All of these subsequent
activities are classified as indirect effects, as are
those economic effects created as the suppliers to
these other industries find the demands for their
services increasing. It is often the case that these
subsequent demands for goods and services within
the local economy result in further demands upon
the front-line tourism-related establishments, such
as when an intermediate supplier increases its
demands for hotel and food and beverage services.
In this case there will be further subsequent rounds
of spending and this will continue, with the amount
of money circulating getting smaller at each
successive round of activity as money leaks out of
the economy in the form of savings and imports,
until the amount of money circulating in the
economy as a result of the initial tourism spending
becomes negligible.
The induced effects occur because at the direct
and indirect levels of economic impact, income will
accrue to residents of the local economy. Some of
this money will be saved and leak out of the system,
but some of it will be spent on goods and services
within the local economy and this will generate
further rounds of economic activity. This additional
multiplier effect 399
activity and its subsequent effects reflect the
induced effects of the initial change in tourist
spending.
The multiplier effect refers to the sum of these
different levels of impacts. They can be positive,
such as when the level of tourism spending
increases, or they can be negative, such as when
the level declines. However, it is important to note
that the volume of tourism spending can remain
unchanged but its distribution amongst the different
economic sectors may change, and this can
bring about a change in the economic impacts of
tourism spending.
A distinction may be drawn between partial
and complete multiplier effects. The former refers
to the multiplier effect associated with a single
productive sector �industry) of the economy, so
that if the demand for that specific industry's
output changes then the total impact, taking
account of the secondary effects generated by
changes in its output needs, can be estimated.
However, the latter �complete) multipliers refer to
the economic impacts of changes in the level and
distribution of tourism spending across all sectors
of the local economy. They are, in effect, a
weighted average of the partial multipliers where
the weights are determined by the distribution of
spending.
There are a range of methods that can be used
to calculate multiplier effects, including export base
theory models, Keynesian multiplier models, ad
hoc multipliers and input±output analysis. The
export base theory and Keynesian multiplier
models are no longer utilised because the high
degree of aggregation makes the models redundant
for policy purposes. The method used to estimate
the multiplier effects will, to some extent, determine
the values of the multipliers. For instance, the
ad hoc multiplier models generally estimate multiplier
ratio values that are approximately thirty per
cent lower than input±output multiplier coefficients
for the same economy. This is because the latter
includes all of the sectors of the economy rather
than just those that are clearly linked to tourism
activity.
Regardless of the methodology used, there are
a number of different multiplier effects that can
be attributed to changes in tourist spending. The
first, transactions/sales multipliers, refers to the