Extending the Relevance of TSA Research for the UK: General Equilibrium and Spillover Analysis

Focusing on the example of the UK, this paper describes and discusses work being undertaken by Oxford Economic Forecasting Ltd (OEF) to extend the relevance of Tourism Satellite Accounting (TSA) for policy assessment and formulation. The research embeds the analysis of the travel and tourism (TT) sector in a general equilibrium framework and considers the implications of spillovers between TT and the supply-side performance of the rest of the economy. The paper is organized as follows. Section (a) briefly describes the advantages and drawbacks of the traditional approach to tourism satellite accounting, based on demand-side analysis and input–output modelling. Section (b) discusses the use of computable general equilibrium (CGE) models to incorporate TSA analysis into a model of the whole economy, and again a number of advantages and weaknesses with this approach are highlighted. Section (c) outlines the model developed by the authors to analyse the interactions between the TT sector and the rest of the UK economy. Section (d) discusses possible spillover effects (or externalities) resulting from changes in TT for the supply-side performance of the rest of the economy, drawing on the insights of endogenous growth theory. It also describes OEF's econometric research on the relationship between the transport infrastructure and the supply-side performance of the UK economy, and how these effects are incorporated in the model described in Section (c). In Section (e) the authors use their model to analyse the impact of illustrative shocks to travel and tourism in the UK. Section (f) sets out their conclusions and highlights areas for further study.