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Today, products produced in one country can easily be exported to other countries where they are consumed by households (residents and/or non-residents) or firms as intermediate inputs or investment. Products can also be exported without crossing borders, this occurs when the transaction takes place between resident and non-resident entities within a single country. When products are sold by residents to non-residents within the seller’s domestic territory, these transactions are primarily associated with international tourism.
Expenditure by non-residents represents an important source of revenue for many countries. In addition to the direct value-added generated by non-resident expenditure, there are also spillover effects to other industries within and across countries through inter-sectoral linkages. While expenditures by inbound tourists are commonly concentrated among hospitality, recreation and transport industries, these tourism services rely on inputs from other upstream industries, such as agriculture, to generate their output. As such, the economic impact of inbound tourism extends beyond the tourism sector. Furthermore, understanding the indirect effects of expenditure by non-resident households requires an exploration of all the upstream interlinkages each sector has with both domestic and foreign industries. Therefore, estimating the economic impact of international tourism on global supply chains requires a model that captures not only the domestic inter-sectoral linkages, but also cross-border intermediate transactions across countries and industries.
This paper updates previous work, see OECD (2019) and Alsamawi, Fritz and Yamano (2020), that develops methodologies to estimate the origin of value added embodied in household final expenditure by non-residents that is not directly measurable in conventional statistics produced by national agencies. It extends the scope by incorporating additional countries and a longer time series, and introduces a comprehensive set of new indicators. These estimations are based on the information contained in OECD’s Inter-Country Input-Output (ICIO) tables coupled with information on consumption by non-resident households by sector and country where consumption takes place, which are combined to measure domestic and foreign value added for 76 economies and for a time series spanning from 1995 to 2020. In addition to the direct economic impact generated from the purchases of non-residents, the model also identifies the indirect impact of those purchases on other industries that are not typically associated with tourism. Direct purchases by non-residents is essentially a proxy measure for international tourism expenditure as it also includes spending by foreign students as defined in National Accounts and Balance of Payments. However, the majority of direct purchases by non-residents estimates are related to international tourism for most countries.
Indirect contributions of tourism are non-negligible
On average, around 28% of the value added from international tourism activities were generated indirectly in upstream domestic sectors across OECD countries in 2019. Moreover, while domestic value added increased in absolute terms in most of the targeted countries over the observed period, foreign value added embodied in products consumed by non-residents (i.e. imported intermediate inputs required to support tourism ‘export’ activity) has also increased. In the latest year, the foreign value added content of non-resident expenditure averaged 17% across OECD countries. This implies that over 80% of expenditure by non-residents is contributing to domestic value added. The ratio is significantly higher when compared to exports of manufactured products, notably in smaller economies (e.g. Luxembourg) where most parts, components and intermediate business services are imported.
The findings in this study provide a better understanding of the wider effects generated by non-resident expenditure and exemplify the importance of upstream domestic and foreign industries in facilitating international tourism. These insights can support tourism policy development and facilitate the debate around sustainably managing tourism in the long-term. To enhance analyses of international tourism and global value chains, countries should continue to improve the quality and timeliness of their non-resident expenditure statistics and link them with national Input-Output tables.
Today, products produced in one country can easily be exported to other countries where they are consumed by households (residents and/or non-residents) or firms as intermediate inputs or investment. Products can also be exported without crossing borders, this occurs when the transaction takes place between resident and non-resident entities within a single country. When products are sold by residents to non-residents within the seller’s domestic territory, these transactions are primarily associated with international tourism.
Expenditure by non-residents represents an important source of revenue for many countries. In addition to the direct value-added generated by non-resident expenditure, there are also spillover effects to other industries within and across countries through inter-sectoral linkages. While expenditures by inbound tourists are commonly concentrated among hospitality, recreation and transport industries, these tourism services rely on inputs from other upstream industries, such as agriculture, to generate their output. As such, the economic impact of inbound tourism extends beyond the tourism sector. Furthermore, understanding the indirect effects of expenditure by non-resident households requires an exploration of all the upstream interlinkages each sector has with both domestic and foreign industries. Therefore, estimating the economic impact of international tourism on global supply chains requires a model that captures not only the domestic inter-sectoral linkages, but also cross-border intermediate transactions across countries and industries.
This paper updates previous work, see OECD (2019) and Alsamawi, Fritz and Yamano (2020), that develops methodologies to estimate the origin of value added embodied in household final expenditure by non-residents that is not directly measurable in conventional statistics produced by national agencies. It extends the scope by incorporating additional countries and a longer time series, and introduces a comprehensive set of new indicators. These estimations are based on the information contained in OECD’s Inter-Country Input-Output (ICIO) tables coupled with information on consumption by non-resident households by sector and country where consumption takes place, which are combined to measure domestic and foreign value added for 76 economies and for a time series spanning from 1995 to 2020. In addition to the direct economic impact generated from the purchases of non-residents, the model also identifies the indirect impact of those purchases on other industries that are not typically associated with tourism. Direct purchases by non-residents is essentially a proxy measure for international tourism expenditure as it also includes spending by foreign students as defined in National Accounts and Balance of Payments. However, the majority of direct purchases by non-residents estimates are related to international tourism for most countries.
Indirect contributions of tourism are non-negligible
On average, around 28% of the value added from international tourism activities were generated indirectly in upstream domestic sectors across OECD countries in 2019. Moreover, while domestic value added increased in absolute terms in most of the targeted countries over the observed period, foreign value added embodied in products consumed by non-residents (i.e. imported intermediate inputs required to support tourism ‘export’ activity) has also increased. In the latest year, the foreign value added content of non-resident expenditure averaged 17% across OECD countries. This implies that over 80% of expenditure by non-residents is contributing to domestic value added. The ratio is significantly higher when compared to exports of manufactured products, notably in smaller economies (e.g. Luxembourg) where most parts, components and intermediate business services are imported.
The findings in this study provide a better understanding of the wider effects generated by non-resident expenditure and exemplify the importance of upstream domestic and foreign industries in facilitating international tourism. These insights can support tourism policy development and facilitate the debate around sustainably managing tourism in the long-term. To enhance analyses of international tourism and global value chains, countries should continue to improve the quality and timeliness of their non-resident expenditure statistics and link them with national Input-Output tables.
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