The economic impact of international inbound tourism on the South Korean economy and its distributional effects on income classes

Abstract

The first objective of this study is to estimate the economic impact of international inbound tourist expenditure on the South Korean economy. An Input-Output (I-O) model is developed to derive tourism multipliers in terms of output, income, employment, value-added, and import as a basis for assessing the economic impact of tourism. Distinct tourism multipliers are derived for six sectors of the tourism industry, namely: accommodation, food and beverage, tour and transportation, entertainment, shopping, and miscellaneous service sectors. The I-O model to be developed in this study differs from previous Korean I-O models in that it estimates the induced effect as well as the direct and indirect effects of tourism. The results indicate that the tourism industry is high labor and wage intensive in nature. Furthermore, the tourism industry tends to produce a lower propensity to make purchases from other industries and be less dependent upon imports, as compared to other major industries in the Korean economy. It was also found that international inbound tourism was significant in generating foreign exchange earnings to the economy. The second objective of this study is to measure the income distribution of tourism among different social groups in South Korea. The distribution of income is an important social policy issue, or "social equity and fairness", in modem welfare countries, but has not been previously examined in the area of tourism. An income distribution model is developed to investigate whether the tourism industry contributes to an equalizing distribution of income among different social classes compared to other major industries in the Korean economy. Two widely used measurements of income inequality are employed in this study: the Lorenz curve and Gini coefficient The findings show that the Lorenz curve for the tourism industry depicts the large concavity and its Gini coefficient is estimated to be high, when compared to the major industries in the economy...