Multiplier effect

An important component of research is to estimate the economic impacts of tourism. Input–output (I-O) models have been widely used to estimate tourism’s contributions to an economy (Crompton et al. 2001; Lee and Taylor 2005). The intent is to estimate the increase in an economy by directly calculating the increase in output and also by considering the growth in related industries, such as suppliers of other goods and services (Kim et al. 2003). A key concept in understanding I-O models is the multiplier effect.

A multiplier in economics is a ratio that measures how much a dependent variable changes in response to a change in the independent variable. Tourism multiplier effect, in simple terms, refers to how many times money spent by a tourist can circulate in a country’s economy. Tourism can directly contribute to the development of the economy by bringing in income and generating new employment opportunities (Khan et al. 1990). More importantly, it can contribute to economy through...