Tourism CGE Modeling

Tourism computable general equilibrium (CGE) modeling simulates how a change in tourism — a surge in inbound visitors, a major event, a new tax, or a demand collapse — ripples through an entire economy when prices, wages, exchange rates, and resources are free to adjust. Unlike input-output analysis, which assumes fixed prices and unlimited supply, a CGE model represents producers, households, government, and the rest of the world as optimising agents linked through markets that must clear. A tourism shock therefore bids up the prices of the resources tourism uses, draws labour and capital away from other sectors, and shifts the exchange rate, so the net economy-wide effect can differ sharply from a naive multiplier. Dwyer, Forsyth and Spurr's 2004 comparison made the influential case that CGE is the preferred technique for evaluating tourism's economic effects when these adjustments matter.