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Procedia - Social and Behavioral Sciences 62 (2012) 952 – 956

WCBEM2012

Tourism and economic growth nexus: an input output analysis in

Turkey
Sibel Atana,Yalcin Arslanturkb*
a
Gazi University, Faculty of Economics and Administrative SciencesDepartment of Ecnometrics, Çankaya Ankara 06500, Turkey
b
Gazi University, Faculty of Tourism, Gölbaşı Ankara 06830, Turkey

Abstract

Tourism is the world’s largest industry and one of the fastest growing sectors, accounting for over one-third of the value of total
worldwide services trade. Tourism, in the last few decades, has become an indispensable source of income for developing
countries, Turkey in particular, and this aspect of tourism has managed to catch the attention of a number of countries, principally
developing ones. The tourism literature abounds a number of studies into tourism and economic growth nexus through a variety
of methods such as Granger-causality, co-integration, regression analyses. However, there are hardly any studies incorporating
input-output analysis. Within this context, this study sets out to examine the tourism and economic growth nexus by means of
input-output analysis, covering forward and backward linkage effects, based on the 2002 input-output table, which is the latest
one released by TURKSTAT. We estimate significance of the impact of tourism on economic growth. The variables used for
economic growth are income and production outputs. The findings are discussed in terms of administrative points.

©Selection
2012 Published by Elsevier
and/or peer Ltd. Selection
review under and/orofpeer
responsibility review
Prof. under responsibility
Dr. Huseyin Arasli. of Prof. Dr. Hüseyin Arasli

Keywords:Economic impact, economic growth,tourism, sectoral linkage, input-output analysis;

1. Introduction

When the demand for the products of any sector is increased, the sector will need to purchase more items as an
input from other sectors to produce any additional output. These purchases will stimulate additional output which in
turn will require further purchases and so on. Thus, we can track these direct and indirect effects throughout the
economy using the output, income, employment multipliers (Alpqami, 2004).In this respect, the effects of sectors on
economic growth can be investigated. Tourism sector is seen by many developing countries as an impetus of
economic growth. The growing business of providing goods and services to meet tourism demand provides a clear
reason for recognising the increasing role of tourism in any economy. The tourism sector in Turkey has become a
pillar sector of the economy, particularly in the last decade. The economic impact of tourism can be investigated by
analysing its impact on the growth of production, using of the factors of production and on the country’s balance of
payment (Mikic, 1988). Estimating the direct, indirect and induced impact of tourist expenditure, one needs to
perform multiplier analysis which can be considered as the fundamental tool to examine the total impact of tourism
on an economy. And, input-output is the appropriate technique to capture the total impact of tourism to estimate the
multipliers (Mazumder, et.al, 2011). Input-output analysis invented by Wassily Leontief (1936) continues to be a

* Yalcin Arslanturk, Tel.: +090-312-485-1460

E-mail address: [email protected]

1877-0428 © 2012 Published by Elsevier Ltd. Selection and/or peer review under responsibility of Prof. Dr. Hüseyin Arasli
doi:10.1016/j.sbspro.2012.09.162
 Sibel Atan and Yalcin Arslanturk / Procedia - Social and Behavioral Sciences 62 (2012) 952 – 956 953

useful modeling technique which can be used to determine, define, measure and assess the linkages between sectors
and examine the inter-dependence structure of sectors in the economy. Known as the forerunners of the field,
Hirschman (1958), Rasmussen (1956), Chenery and Watanebe (1958) investigated the linkages between the sectors
and developed the input-output analysis. Input-output analysis identifies the interdependence of production and
consumption in an economy. It shows the interrelations among different sectors that purchase goods and services
from other sectors and which in turn produce goods and services that are sold to other sectors. The input-output table
is designed to provide a concise and systematic arrangement of all economic activities within an economy. It shows
the intersectoral flows in monetary terms for a particular year where the flows represent intermediate goods and
services. Input Output analysis is especially well suited to assessing how changes in one or more sectors of the
economy will impact on the total economy the effect of tourism
sector on the economy using input-output analysis in terms of backward and forward linkages effect

In this study, we use input-output analysis to examine the significance and impact of tourism sector on the
economy of Turkey and identify whether its interaction with other sectors may enhance economic growth. For this
purpose, firstly we calculated the output multipliers of the sectors. Also secondly we carry out linkage analysis to
examine the interdependence between tourism and other sectors.

2. Input-Output Analysis

Input-output analysis begins with the construction of a table, similar to the table of national/regional accounts,
which shows the economy of the destination in matrix form. Each sector of the economy is shown in each column as
a purchaser of goods and services from other sectors in the economy, and in each row as a seller of output to each of
the other sectors (Rameezden, et.al, 2005). Then a group of equations are computed considering that a change in the
amount of final demand will make an increase in the amount of activity within the economy, which manifests itself
as changes in the output and sales of each sector.

In input-output analysis, A is the n by n matrix of technical coefficients. Each element of a represents the direct
input requirements from sector i per unit of final demand for the output of sector j. Then, there is an inverse matrix
in Leontief system like .

Each element of this inverse matrix denoted by wij is called an inter-dependence coefficient which measures the
total stimulus to the
multiplier for sector j is given by the column sum of wij(i = 1, 2,
.

The output for each sector in the economy can be obtained through

where, Y; dimension vector indicating end-demand amount and X is the vector for output for each sector
(Temurshoev, 2004: 3-4). Given the inverse matrix, two different approaches are found in measurement of linkages.
Rasmussen (1956) favored the use of column (row) sums of the Leontief inverse matrix for measuring the inter-
sectoral linkages because it takes into account both direct and indirect effects generated by the interrelationships.
These indicators are considered as total (direct plus indirect) backward and forward linkage indicators. Chenery and
Watanabe (1958), proposed to use the column and row sums of technical coefficient matrix to measure the backward
and forward linkages of a particular sector. This method measures only the first round effects generated by the
interrelationships between sectors since it is based on direct input (or output) coefficients. Therefore, these
indicators are called direct backward and direct forward linkage indicators.
Total backward and total forward linkage indicators are also called output multipliers and input multipliers
respectively. Backward and forward linkage indices are respectively and If the index value is higher than 1, it is said
954 Sibel Atan and Yalcin Arslanturk / Procedia - Social and Behavioral Sciences 62 (2012) 952 – 956

that there is high sectoral linkage, if the opposite, low sectoral linkages. These indexes are called Hirschman -
Rasmussen indices. A higher index value for both sectors than their individual sector index value shows that the
sector under consideration is of a key position.

3. Application

The objective of this study is to measure or estimate the impact of tourism on economic growth in Turkey. This
objective is carried out by using output multiplier from Turkey input-output table of 2002 by TURKSTAT, based on
the NACE rev. 1.1 classification of Statistical Classification of Economic Activities in the European Community,.
We use input-output analysis to analyze the significance of tourism in the economy of Turkey and identify whether
its interaction with other sectors may enhance economic growth. Our analysis is focused on two issues, firstly; we
use multiplier analysis to assess the relative significance of tourism in creating output. Secondly, we use linkages
analysis to examine the interdependence between tourism and the other sectors.

In this application, firstly output multipliers are obtained using domestic direct intermediate input coefficients for
the sectors and this multiplier values are given Table 1. The original I-O Table contained 79 sectors, which we
aggregated to 15 sectors. In addition to this, the sectors we term tourism are the ‘Hotels and restaurants’ sector,
supporting and auxiliary transport activities; activities of travel agencies and recreational, cultural and sporting
activities. Besides this, although the IO Table that we use is the most recent one for Turkey, its data refers to the
year 2002. In practice, IO tables take a number of years to be published and construct, especially in developing
countries where delays of five to seven years are common. It is reasonable to expect that structural coefficients
change slowly in developing countries (Kweka, et.al, 2003).

The results are obtained from input-output analysis and the estimates of output multipliers for aggregated 16
sectors of Turkish economy are shown in Table 1 and ranked accordingly.

Table 1. Total Output Multipliers

Sector Total Output Multiplier Rank

1–2 1.5197 13
5 1.3371 15
10 - 14 1.5851 10
15 - 37 2.0168 1
40 - 41 1.8676 4
45 1.8868 3
50 - 52 1.5424 12
55 1.8966 2
63 1.8451 5
60 - 64 1.6545 7
65 - 67 1.5430 11
70 – 74
1.4246 14

80 1.3315 16
 Sibel Atan and Yalcin Arslanturk / Procedia - Social and Behavioral Sciences 62 (2012) 952 – 956 955

85 1.7340 6
92 1.6419 8
90,91,93,95 and 75 1.6404 9

We find the output multipliers of tourism sector are 1.8966 for hotels and restaurant, ranking second, 1.8451 for
supporting and auxiliary transport activities; activities of travel agencies, ranking fifth, and 1.6419 for recreational,
cultural and sporting activities, ranking eighth. In addition to multiplier values, we give estimates of backward and
forward linkage indices in Table 2. According to these results, the manufacture sector has the highest output
multiplier and the second is hotel and restaurants sector that is the important indicator of tourism sector.

Table 2. Total Backward and Forward Output Linkage Indices

Total Backward Total Forward

Sector Rank Rank
Linkage Index Linkage Index
1-2 0.9187 13 1.0374 6
5 0.8083 15 0.6228 16
10 - 14 0.9582 10 0.7100 10
15 - 37 1.2192 1 2.5258 1
40 - 41 1.1290 4 1.3010 3
45 1.1406 3 0.6703 12
50 - 52 0.9324 12 1.3075 2
55 1.1465 2 0.6878 11
63 1.1154 5 0.9892 8
60 - 64 1.0002 7 1.2336 5
65 - 67 0.9328 11 1.0075 7
70 - 74 0.8612 14 1.2530 4
80 0.8049 16 0.6276 15
85 1.0483 6 0.6291 14
92 0.9926 8 0.7393 9
90, 91, 93, 95, 75 0.9916 9 0.6579 13

Our results show that hotels and restaurants and supporting and auxiliary transport activities; activities of travel
agencies sectors have high backward linkage and low forward linkage, recreational, cultural and sporting activities
sector has low both backward linkage and forward linkage. Also, the hotel and restaurants sector has the second high
backward linkage effect in all sectors and this rank means it has significant backward linkage. According to these
results, the manufacture products, electric energy, gas, steam and water, transport, storage and communication
sectors are the key sectors in the economy.

4. Conclusion

This study sets out to examine the tourism and economic growth nexus by means of input-output analysis,
covering forward and backward linkage effects, based on the 2002 input-output table, which is the latest one
released by TURKSTAT. In Turkey, tourism is growing very fast and its contribution to the economy is very
significant. For output multiplier values of the tourism, especially for the output significance of hotel and restaurants
indicator of tourism sector to be transformed into growth of the economy, sectors that benefit from it should be
956 Sibel Atan and Yalcin Arslanturk / Procedia - Social and Behavioral Sciences 62 (2012) 952 – 956

equally vibrant. Identification of such sectors is important of policy purposes as they may constrain the growth
impact of tourism. Our analysis shows that tourism sector has important and significant impact on economy
especially with hotel and restaurant indicator. In conclusion tourism is not the key sector in economy, but especially
for hotel and restaurants and supporting and auxiliary transport activities; activities of travel agencies indicators,
tourism sector has high backward linkage in the economy. Under the light of the findings, it is seen that the total
amount of the input from the other sectors for the output in tourism sector is high and tourism sector is in a structure
of nurturing other sectors hence, it is thought that tourism sector will support the production in other sectors, with a
considerable impact on growth.

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Appendix1. Sectors and Their Codes

Product (Sectors) Sector Code

Products of agriculture, hunting and forestry, logging and related services 1-2
Fish and other fishing products; services incidental of fishing 5
Mining and quarrying products 10 - 14
Products of manufacturing 15 - 37
Electrical energy, gas, steam and water 40 - 41
Construction work 45
Wholesale and retail trade; Motor vehicle, Motorcycle, Repair of personal and household goods 50 - 52
Hotels and restaurants 55
Supporting and auxiliary transport activities; activities of travel agencies 63
Transportation, storage and communication services 60 - 64
Financial intermediation activities 65 - 67
Real estate, renting and business activities 70 - 74
Health and social work, Education 80,85
Recreational, cultural and sporting activities 92
Other social and personal service activities and public administration and defense 90,91,93,95 and 75