The impact of tourism on the national economy and methods of its assessment: literature review

Ivanova Yuliya Olegovna ORCID: 0000-0002-1272-3244 PhD in Economics Associate Professor, Department of Management and Marketing in Sports, Faculty of Higher School of Management, Financial University under the Government of the Russian Federation 127083, Russia, Rossiiskaya Federatsiya, G. oblast', g. Moscow, ul. Verkhnyaya Maslovka, 15 YUOIvanova@fa.ru Grigoreva Valentina Viktorovna ORCID: 0000-0001-5129-9039 PhD in Economics Associate Professor, Department of National Economy, Russian Academy of National Economy and Public Administration (Moscow) 119313, Russia, g. Moscow, ul. Garibal'di, 13, korp. 2 vallsheff@mail.ru

Pozdnyakov Konstantin Konstantinovich ORCID: 0000-0003-4254-9184 PhD in Economics General Director, ANO DPO "Academy of PSB" 109052, Russia, g. Moscow, ul. Smirnovskaya, d. 10, str. 8 kk.pozdnyakov@gmail.com

Introduction

For Russia, tourism is an important sector of the economy with a contribution to GDP and total employment of 3.5-4% and 5.6%, respectively. In the last decade, the Russian tourism industry has demonstrated sustainable development, which was interrupted by the beginning of the COVID-19 pandemic, but as the country opens up and restrictions are lifted, growth will continue, and the industry will return to the level of pre-crisis values. Sustainable tourism development will remain one of the viable alternatives to the growth of the national economy with less reliance on traditional industries. The development of effective economic development strategies requires a deeper understanding of the impact of the tourism industry on the Russian economy in a new post-covid normality. 

The importance of the growth and development of the tourism industry and the determinants of its impact on the economy have been widely studied in recent decades by researchers in both developed and developing countries. Today, tourism is recognized as an important factor determining economic growth. Among the numerous advantages of tourism for the economy are employment, foreign currency receipts, growth in household incomes and government revenues, improvements in the balance of payments and an increase in the number of government policies encouraged by the growth of the tourism industry ^[1-3].

In a number of published works, tourism is considered as a way of economic development for lagging, structurally weak peripheral areas, as an industry that provides jobs and income growth for the destination, capital inflow and prevention of internal migration by creating positive socio-economic prospects ^{[3, 4]}. At the same time, empirical studies show that high hopes for the economic potential of tourism are not always justified ^[5]. In order to justify these expectations and, accordingly, to choose more appropriate strategies for the development of the industry, a deeper understanding of the mechanisms of influence is needed. To do this, you should answer a number of questions:

1) what influences the economic results of tourism and can these determinants be taken into account when making management decisions? 

2) what are the economic consequences of tourism activities?

The answer to these questions requires an analysis of various concepts – economic contribution and impact (impact) or benefits (effects), added value or economic value – their content, costs that need to be taken into account to assess the impact, etc. In practice, these considerations should lead to a more realistic picture of tourism and hospitality as a means of economic development and to more informed strategies.

The main difficulty in defining the boundaries of the tourism sector is to determine which investment costs should be attributed to the development of tourism. Despite the fact that until now not all researchers have considered tourism as a "sector" from the point of view of national accounting, it includes a set of goods and services that are provided specifically for consumers (tourists) and would not be provided otherwise ^[5]. Due to the relationship with other sectors of the economy, it is quite difficult to analyze the results of tourism activities and carry out planning in the industry.  The lack of reliable statistical data sometimes makes it difficult to determine the mechanisms by which tourism contributes to growth, as well as its potential for development ^[6]. 

There are a number of reasons why the topic of economic effects of tourism is especially relevant for both economic research and management practice:

- unlike other sectors, the economic importance of which is most often not disputed, and therefore widely recognized, public administration bodies need to determine the economic importance of tourism to justify the financial resources allocated for the development of tourism, regulations adopted to regulate the industry, development programs and plans being developed, taxation and subsidies ^[2];

- due to the complex structure of the various industries forming the tourism sector, significant empirical research is required to measure the economic significance of tourism for these subsectors and industries, as well as for the national/regional economy as a whole. Tourism is considered as a means of accelerating economic growth due to its positive impact on the economy as a whole ^[7]. A number of authors have investigated the relationship between tourism and various sectors of the national and/or regional economy together with a quantitative assessment of both direct and indirect externalities associated with the expansion of the tourism sector. Researchers take into account the "multiplicative effects" of tourism to reflect the secondary effects of tourist spending and to show a wide range of sectors of regional and local economies that can benefit from tourism.

This article is to a certain extent aimed at leveling the existing gaps in scientific research. The purpose of the article is to analyze and generalize methodological approaches to assessing the economic impact of tourism. The evolution of scientific thought in the field of the economic impact of tourism on the economy is presented: an overview of various economic effects is presented and the factors influencing the economic contribution of tourism are summarized, as well as methods and models for assessing the economic impact of tourism on economic growth are analyzed.

Materials and methods of research

This study is a systematic review of the literature devoted to the study of the impact of tourism on the economy and methods of its assessment. Systematic literature reviews have a number of differences from traditional reviews. First, it is necessary to develop a research strategy; secondly, to define clear criteria for inclusion and/or exclusion of literature; thirdly, to form a database or as much relevant literature as possible for subsequent evaluation and interpretation. Thus, such shortcomings of the traditional review are leveled, both in terms of volume - the number of articles reviewed - and in terms of methodology in terms of the lack of structuring of the protocol and reduced reproducibility of the study. This reduces inconsistencies between reviews on the same topic.

Our research consisted of several stages. 

At the first stage, a search strategy was developed. Two sets of keywords related to the concepts of "economic contribution" and "tourism" were selected and used in combination.

The primary literature search was conducted through the authors ' library service using the Scopus database using the following algorithm:

1) selected articles from the subject areas: business, decision-making, economics, finance, econometrics;

2) in the title text or among the keywords were the words:

· economic contribution and/or economic impact and/or economic effect,

· tourism.

The time interval between 2000 and 2021 was considered as the search interval.

At the next step, publications were identified and practical screening was applied. Only journal publications in English were included in this systematic literature review, while conference proceedings, books, company reports, etc. were excluded. Thus, consideration of only peer-reviewed articles was ensured. No other quality criteria were used for filtering. In addition, only English-language articles were selected for analysis. As a result, 1,231 articles were identified.

The second step of selection included manual filtering of articles for further analysis. Only conceptual and/or empirical studies that focused on the contribution of tourism to the national economy were retained. The titles and abstracts of all the articles were carefully read and selected depending on their subject matter. As a result, only those articles were extracted that covered the economic impact and contribution of tourism, as well as methods for assessing this contribution (influence). After eliminating duplicates, 236 studies were transferred to the screening stage. At this stage, 31 studies were rejected mainly because they were published in journals outside the field of economics.

At the third step, the text of all 205 remaining publications was fully read. Only those articles that were able to contribute to the answers to the research questions were selected. The analysis of cross-references in the database made it possible to overcome the possible limitations of keyword search. Thus, it was possible to identify 11 additional works. As a result, taking into account the established selection criteria, both descriptively and thematically, 216 articles were analyzed. 

A similar search strategy was used by us to select relevant articles in the scientific electronic library https://elibrary.ru / in the field of "Economics. Economic sciences" for the keywords "economic contribution" / "economic impact" / "economic effect", as well as "innovation". As a result of the selection, 102 articles were included in our literature database.

Below, due to the limitations imposed by the requirements for the volume of published materials, we present selected results of a systematic review with an indication of 27 sources from our literature database.

Results and their discussion

1.     Economic effects of tourism

In existing studies, the economic effects of tourism are often divided into tangible (quantitative or directly quantifiable in monetary terms) and intangible (qualitative or not directly quantifiable) effects. Positive tangible and intangible effects correspond to the benefits of tourism for society and the economy. An analysis of the literature ^[8-12] allowed us to conclude that the economic benefits of tourism are not equal to either the economic impact of tourism or the economic contribution of tourism. It is obvious that the net profit to be analyzed includes consideration of both the costs of tourism development and the opportunity costs of tourism activities, defined as lost income from alternative investment opportunities ^[10]. This concept is associated with the often ignored difference between real and distributive effects: real effects lead to an overall improvement in the supply of goods by private households and, thus, to a positive impact on the overall level of well-being (see Figure 1). On the contrary, distribution effects sum up all monetary changes after a measure in which benefits in one sector of the economy reflect the corresponding losses in another — the overall level of well-being remains constant. Other negative economic consequences of tourism for the Territories are rising prices due to inflation and growing demand, as well as potential tax increases, since governments need to finance expensive tourist infrastructure ^[8-12].

Economic contribution tourism refers to the economic significance of tourism — to the contribution that tourism-related expenses make to the gross domestic (regional) product, household income, value added, foreign exchange earnings, employment ^{[8, 12-14]}. One of the common approaches to quantifying the economic contribution of tourism is the Tourism Satellite Accounts (TSA). However, using this indicator as an accounting approach allows only direct effects to be measured, while indirect and induced effects need to be evaluated using modeling approaches such as input-output models (MSV). This means that the results of the TSA and MSV approaches cannot be compared directly.

Figure 1. Economic contribution, impact and benefits of tourism, and influencing factors

While the economic contribution of tourism measures the size and overall importance of an industry in the economy, economic impact refers to changes in economic contribution as a result of certain events or actions that represent "shocks" to the tourism system. The economic impact should not be confused with the contribution itself. These changes are caused by new/irregular tourist expenses invested in the destination ^{[14, 15]}. Two related definitions of economic impact are given in the literature, emphasizing this understanding:

1) economic impacts are net changes in new economic activity related to an industry, event or policy in the existing regional economy ^[14];

2) economic impact is the best estimate of what economic activity could be absent in the local economy if the relevant event, industry or policy were absent ^[15]. In our case, this refers to tourist activities, such as a special event, a specific attraction, etc.

Thus, technically, the difference between the analysis of the economic contribution and the impact of tourism lies in the scope of the analysis (overall significance compared to the effect of "shocks"/ "changes"), and not in the methods.

Central to the assessment of the economic contribution and impact of tourism is the concept of leaks (Fig. 1) occurring in the form of imported intermediate resources from outside the country/region, etc. This means that not all the share of tourist expenses leads to income in the destination. At the national level, only leaks abroad are of interest, while at the regional/local level, the share of income remaining in a particular territory is crucial. This proportion is sometimes referred to as the coverage ratio, and can be defined as "travel expenses minus leaks". The higher the coverage ratio, the higher the share of tourism income attributable to the study area. This fact means that from the point of view of economic geography, only the money actually remaining in the region under study is important.

As mentioned above, the economic contribution/impact of tourism refers to the actual expenses of visitors ^{[10, 11, 16]}. In the terminology of economic valuation, these costs represent the willingness shown by visitors to pay and, thus, the (quasi) market price for a holiday. Based on this concept, researchers often overlook one aspect — the value of the entertainment experience, which refers to the maximum amount that the consumer is willing to pay (MSGZP) to visit the destination/attraction minus the actual costs. However, consumer spending does not fully disclose the MSGPP, which differs in each individual case. Consequently, the economic effect is only a part of the tourist benefits and is not equal to the economic value of recreational use. 

2.                Spatial aspects and factors affecting the economic effect of tourism

The economic effects of tourism are manifested and, accordingly, can be measured at various spatial scales - from global, continental, national to regional and local levels ^[17-19]. The significance of the effects varies depending on these scales. Thus, at the national level, the influence of tourism on foreign exchange earnings is of great importance. At the regional and local levels, it becomes more important to assess the jobs created and the existing "leaks".

It is necessary to take into account not only the spatial scale, but also the place where expenses occur, as well as who exactly makes a profit. It is possible to distinguish between the area of arrival of tourists, the area of travel and the destination. Each area has a different mix of expense categories and empirical issues. 

Tourist arrival area: in the initial area, travelers search for information, book a trip and buy equipment ^[17]. However, it is often problematic to allocate equipment costs for a specific trip or vacation. 

Travel area: During the trip, travelers spend money on gasoline, food, road tolls, accommodation for intermediate stops, etc. Two problems arise: firstly, most of the transportation costs are booked and paid in advance in the source area and in the area. the intersection of planes, trains or water transport does not give any advantages. Secondly, if someone wants to link travel expenses to a certain area / location, it is necessary to take into account the propensity of tourists to several trips (in the case of round trips) ^[18]. 

Destination: at the destination, tourists pay for accommodation, gastronomy, products, events, souvenirs, services, etc. Thus, for regional economic analysis (for example, events or specific attractions), spatial restriction, respectively, the size of the destination are decisive factors of influence, because a significant part of the total expenses of tourists could not be incurred in the region itself ^[19]. In addition, for these estimates of attractions or events, only the costs at the destination are mainly taken into account, while the costs of the trip or to the source area are not taken into account. 

Thus, the economic effect of a tourist event is likely to be inversely proportional to the distance from its location. 

A number of studies ^{[8, 23, 24]} summarize the main requirements for the analysis of the economic contribution / impact of tourism:

1) number of days of visit; 

2) the amount of expenses per visitor; 

3) types of visitors and the purpose of the trip; 

4) an economic model for calculating effects. 

1) The number of visiting days is often confused with the number of visitors, which in some cases may be identical, but most often both indicators differ. To assess the contribution of tourism, it is necessary to take into account the length of stay, the number of visits to specific attractions or the frequency of classes ^{[21, 24]}. As for visits, the question remains: should the economic effects of tourism be used on a national scale, because the effects of domestic tourism are only distribution effects? (only incoming tourists make an additional contribution to the national economy – approx. authors). However, in this regard, it can be argued that a trip within the country avoids a trip abroad, which can lead to leaks from the national economy.

Similarly, the question of whether local residents in the studied areas should be included in national and regional economic assessments is disputed. Some researchers believe that local residents should be excluded, since their expenses are considered a re-circulation of pre-existing incomes in the region ^[17].  On the contrary, others argue that ignoring the costs of local residents will lead to an underestimation of the overall impacts ^[8]. Locals can also spend their money outside of their region, which will lead to leaks again.

2) Expenses: The literature summarizes the most important rules that can and cannot be done when it comes to analyzing visitor behavior, and discusses the methods and models used to estimate visitor expenses ^[24]. The most important factor determining travel expenses is income, regardless of how much it is realized. This conclusion is in good agreement with the general microeconomic theory, which postulates the importance of income for demand ^[8].

3) Purpose of the trip: in order not to overestimate the economic contribution of specific attractions/events, it is necessary to analyze the purpose of the trip. It is crucial that only those expenses that were spent in addition to the money spent in any case at the destination are taken into account, since those spent would have gone there even if the attraction in question did not exist ^[23].

4) Economic model: Economic models are inevitably necessary to assess the indirect and induced economic effects of tourism and are often considered as the most difficult part of the assessment process ^[24]. Below we will look at existing approaches in the literature to assess the impact of tourism on the economy in more detail.

3. Evolution of the methodology for assessing the impact of tourism on the economy

Empirical data on tourism and economic development have led to ambiguous conclusions, and sometimes contradictory results, despite the tendency to choose time series methods as research methods ^{[7, 13, 16]}.

Four hypotheses have been empirically investigated to determine the relationship between tourism and economic growth (Figure 2). The first two hypotheses state a unidirectional causal relationship between these two variables. The other two hypotheses confirm the existence of a bidirectional hypothesis (the bidirectional hypothesis of causality) or that there is no connection at all (the hypothesis of the absence of causality), respectively.

The tourism-based growth hypothesis proposed by Balaguer and Cantavella-Jorda ^[15] states that the expansion of international tourism activities contributes to economic growth, therefore suggesting a theoretical and empirical link between inbound tourism and economic growth. Theoretically, this hypothesis was directly derived from the export growth hypothesis, which postulates that economic growth can be achieved not only by increasing the amount of labor and capital in the economy, but also by expanding exports.

The "new growth theory" developed by Balassa ^[20] suggests that the expansion of exports can provoke economic growth, since it promotes specialization and increases the productivity of factors of production by increasing competition, creating positive externalities by expanding the dissemination of specialized information and abilities. Exports also contribute to economic growth by increasing the level of investment. International tourism is considered as a non-standard type of export, since it indicates the source of income and consumption on the spot. Given the difficulties in measuring tourism activity, economic literature tends to focus on the export of raw materials and industrial goods, therefore ignoring this sector of the economy. Similarly, the export growth hypothesis, the tourism-based growth hypothesis, analyzes the possible temporal relationship between tourism and economic growth, both in the short and long term. The question is whether tourism activity leads to economic growth or, conversely, economic growth stimulates the growth of tourism, or is there really a bidirectional relationship between these two variables.

Figure 2. Methodology for assessing the impact of tourism on economic growth

According to the hypothesis of "economic growth based on tourism", tourism creates many advantages that spread along several routes, contributing to economic growth ^[21]. In particular, it is believed that tourism (1) increases foreign exchange earnings, which, in turn, can be used to finance imports, (2) it is encourages investment and pushes local firms to increase efficiency due to increased competition, (3) it reduces unemployment because tourism activities are largely based on human capital and (4) it leads to positive economies of scale, thus reducing production costs for local businesses. Despite the fact that this hypothesis prevails in the literature, few studies provide results in support of it.

Financial markets are considered a key factor in ensuring strong economic growth, since they contribute to economic efficiency by diverting financial resources from unproductive use for productive purposes. The origin of this role of financial development can be traced back to Schumpeter's seminal work ^{[16, p. 1398]}. Schumpeter points out that the banking system is a decisive factor in economic growth due to its role in distributing savings, encouraging innovation and financing productive investments. The importance of financial development in the Russian economy is reflected in the creation of "development banks" aimed at financing infrastructure and sustainable development projects in these and other developing countries. The financial crisis has negatively affected both inbound and outbound tourism, money supply cycles can affect cyclical movements of tourist demand and that these impacts are asymmetric depending on the stage of development of the cycles. There is a causal feedback type relationship between tourist arrivals and financial development, as well as trade openness and tourist demand, properly pointing out the feedback or mutually reinforcing influence between variables and providing evidence that tourism plays a central role in improving key sectors and overall income levels. Collective actions in informal microfinance organizations allow participants-entrepreneurs to create small travel companies. Financial development has a long-term impact on productivity per employee. It follows from these studies that financial development affects tourism and economic growth ^{[8, 9, 17]}. For this reason, it should obviously be included in the analysis of variables showing the impact of tourism on the economy.

The evolution of methods for assessing the impact of tourism on the economy began with relatively simple models (Archer, 1997) and continued with more advanced input-output models (Fletcher, 1989) ^[12]. The latter, however, demonstrate methodological shortcomings due to restrictive assumptions, such as "free, unlimited flow of resources into the economy. As a result, it [the MSV model] does not capture feedback effects, which usually work in opposite directions with respect to the initial change. Important improvements have been proposed as important improvements to social accounting matrices and computable general equilibrium models, which may include resource constraints and feedback effects ^[16]. 

Computable general Equilibrium models (CGE models) are a class of economic models that use actual economic data to assess how an economy can respond to changes in policy, technology, or other external factors. CGE models are also called AGE models. 

Computable general equilibrium models are most likely the most advanced group of multiplier models that overcome many of the effects of overestimating input-output models, but they still have their drawbacks. These include some restrictive assumptions, such as constant returns to scale in production functions and ideal markets, high requirements for the quality of input data and associated costs, or not very vivid presentation of results. Thus, when comparing CGE models with conventional MSV, it can be concluded that CGE models are inferior in transparency (predictability of results), efficiency (data, time and cost) and comparability (standardization of model structure, complexity and assumptions). In addition, the analysis of past data goes beyond the scope of CGE models, because they model what will happen in the economy as a result of external shocks, but do not state what has already happened. 

In existing studies, models are widely presented that allow for the evaluation of multiplicative effects tourism. Their value is decisively influenced by three factors.

1. The size of the research area to which the multiplier belongs, since the possibilities of economic autarky largely depend on this size. It also affects the number of potential spending rounds: the larger the survey area, the larger the multipliers and less leakage ^[5]. 

2. The level of economic development of the territory: the more resources of enterprises can be acquired at the local level, the less leakage will be and the greater the multiplier will be ^[7]. 

3. Cost structure: the higher the share of locally produced goods/services, the higher the direct and indirect effects ^[8].

The sensitivity of the economic contribution of tourism to changes in these influencing factors is rarely analyzed. All approaches to the assessment are necessarily based on the input of reliable empirical data on the number of visitors and their expenses ^{[7, 25]}. Without these measures, even the most detailed, theoretically sound economic model would give incorrect results. In addition, economic impact analysis is an inaccurate process, and the analyzed data should be considered as a "best guess", and not as accurate indicators ^[15]. This provision refers to the problems inherent in all approaches to economic assessment, as well as to the lack of comparability of the results of TSA and MSV: estimates of the economic effects of tourism should not be considered as irrefutable, since they are open to interpretation and misuse. Thus, a critical assessment of research on the economic contribution of tourism should take into account a number of aspects, including the subject of the assessment, the data used, approaches and models based on assumptions regarding the data used. 

Conclusions

The purpose of this article is to analyze and generalize methodological approaches to assessing the economic impact of tourism. As a result of the study, the following conclusions were made.

According to the bidirectional growth hypothesis put forward in recent studies, tourism is not only an engine of economic growth, but the economic result itself can play an important role in ensuring the growth potential of the tourism sector. In turn, the allocation of resources to support both tourism and tourism-related industries can contribute to both tourism development and economic growth.

COVID-19 caused an unprecedented crisis in the industry, reducing the number of international tourists in the world by more than 80% in 2021 compared to 2020; tourism spending fell by 60%.  The tourism industry continues to adapt to the conditions of the "new normality". As tourism opens up and interest in recreation resumes in some regions of Russia, the Russian government should take the opportunity to rethink its role in tourism, contributing to the recovery of the sector and increasing its impact on the national economy in the long term.

In order to develop the Russian tourism industry and increase its contribution to Russia's economic growth, it is necessary to develop an integrated approach to state tourism management, including sound methods for assessing the economic contribution of tourism.

For the purposes of evaluation, it is necessary to distinguish between the concepts of economic contribution and impact (impact), economic benefits (effects) and economic value. The difference between the analysis of the economic contribution and the impact of tourism lies in the scope of the analysis, not in the methods. Central to the assessment of the economic contribution and impact of tourism is the concept of leaks occurring in the form of imported intermediate resources from outside the country/region, etc. 

The economic effect is only a part of the tourist benefits and is not equal to the economic value of recreational use. The economic effects of tourism are manifested and, accordingly, can be measured at various spatial scales - from global, continental, national to regional and local levels. The significance of the effects varies depending on these scales. So, at the national level, the influence of tourism on foreign exchange earnings is of great importance. At the regional and local levels, it becomes more important to assess the jobs created and the existing "leaks".

The evolution of methods for assessing the impact of tourism on the economy has led to the development of sufficiently advanced models to assess the multiplicative effect of tourism. Despite this, there is a general trend towards using time series methods as research methods. The assessment of the economic impact of tourism remains an inaccurate process, which is compounded by the lack of comparability of the results of the TSA and MSV. Therefore, estimates of the economic effects of tourism should not be considered as irrefutable because of their openness to interpretation and misuse. The critical evaluation of various economic assessment studies should take into account the following aspects: the subject of the assessment, the data used, approaches and models based on assumptions regarding the data used. The most important factor determining travel expenses is income, regardless of how much it is realized. This conclusion is in good agreement with the general microeconomic theory, which postulates the importance of income for demand.  The best indicator of income is the country of origin. Therefore, future analysis may be limited to variables based on tourists, their income and age.