ASSESSING THE BENEFITS AND COSTS OF INBOUND TOURISM

Inbound tourism brings both benefits and costs to a destination country. For policy reasons, it is necessary that the net benefits of inbound tourism be accurately assessed for different countries. With specific reference to Australia, this paper first presents reasons why gross expenditure by foreign tourists exaggerates the benefits from inbound tourism. Second, the paper identifies some distortions which, to varying degrees, exist in all economies and which affect the net national benefits from inbound tourism. These distortions arise from the presence of taxes and subsidies, market power, externalities, terms of trade effects, government revenue effects, labor market effects, and foreign exchange effects.