Computable General Equilibrium (CGE) Models and Tourism Economics

Computable General Equilibrium (CGE) Models have been used extensively for the evaluation of trade and fiscal policies and for the measurement of the effects of shocks on the economic and social conditions in a country, especially the structure of its production sectors and its income distribution. In this chapter, we use CGE models to tourism and expand on the technical features of CGE models. CGE models are an invaluable method to evaluate the effects of shocks and of policies at a much disaggregated level. They have no serious rival, which can determine which sectors will expand and which will contract, and which classes of households will see an improvement in their welfare and which will suffer deterioration of it. The application of CGE models to tourism economics has been much restrained until recently by the lack of data. However, the quality and quantity of information on tourism activities have steadily improved in a large number of countries since the beginning of this decade, therefore making it possible to take advantage of these models in analyzing tourism economics.