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COLUMN: Multiplicative effects of tourism

Namik Colakovic

The term multiplier is derived from the Latin word multiplicare, which means to multiply or generally to increase, and in economic theory expresses the quantitative relationship of the change of exogenous variables (value of investments, consumption, exports and other values) to changes in endogenous variables (aggregate demand, national income or employment) . Given the varying intensity of the dependence of these variables, the multiplicative effect is different and can be several times greater than the initial change.

If the question arises as to why this text began with the definition of the term multiplier, the initiation was closely related to the frequent mention of tourism as a prosperous economic branch, in various journals, handbooks, online portals, and official publications. In this assertion, the economic character of tourism is absolutely indisputable, but the word branch can be disputed.

Namely, by definition, tourism is a set of relationships and occurrences that happen during travel and stay of tourists in a tourist destination. If this is viewed from an economic point perspective, then this set is composed of a series of interactions between tourist offer and tourist demand, the result of which is measured through tourism consumption. Therefore, the starting point is to explore all the economic effects of tourism, namely tourism consumption, that is, part of the personal consumption of tourists, intended for traveling and staying outside the place of permanent residence for rest, fun, rehabilitation, etc.

The level of this consumption depends largely on the extent to which the tourist’s inclination to consumption and, of course, the quality of goods and services offered by numerous actors of the total tourist offer. From this mass of bids, we can distinguish some activities that fall into the narrowest circle of satisfying tourist needs and absorb most of the consumption of tourists: catering, trade, traffic, tourist agencies … Besides these basics, tourism is related to other activities, such as food industry, agriculture, construction, education, health, real estate mediation, and it is generally difficult to find an economic activity that cannot be linked to tourism activities. Accordingly, tourism spending can be viewed as a part of the total revenue of each of these branches, apart from tourist mediation, where it represents the entire source of income.

The increase in tourist turnover and consumption in catering, transport, trade and tourism enterprises is indirectly reflected in the increase in the volume of production in various branches of industry, in agriculture, crafts, and then on the increase of employment and social product in these industries. Multiplication of tourism consumption is based on and results from the interdependence of economic activities and final consumption. In determining the multiplier effects, it must be taken into account that the money spent by foreign tourists in catering, trade and transport comes from these activities, overflowing in industry, agriculture and other industries, as well as final consumption. For this reason, the money is subject to all the features that operate within these activities. All this points to the view that tourism should not be identified with an economic branch, since it is essentially a set of different industries.

Quantifying the share of each of these activities in total tourism consumption is very complex and is essentially an approximation, since it is necessary to separate the current consumption of the domicile population from the total tourist consumption from the total income of each of these activities. And then it is necessary to separate the consumption of domestic from the consumption of foreign tourists from this total tourist consumption, as their influence on the economy of the country is significantly different.

If domestic tourists spend their share of personal consumption within the boundaries of their country, then the consumption does not increase or reduce the national product, because in this way the redistribution of already acquired part of personal income in the randomized area is carried out. On the other hand, foreign tourists enter in the selected tourist country part of the means of their personal consumption, with the notion that these personal earnings have been acquired in their home country. This led to the outflow of money from the emitting soil and at the same time to inflow into a receptive tourist country, and a direct increase in its national income. The final result shows the balance of foreign relations.

All this indicates that it is time that even Bosnia and Herzegovina begins to learn and exploit all the advantages that tourism brings with its developmental propulsion. Given that now one of the priority tasks of economic policy is a good restructuring of the economy, it is a good time to build a long-term policy of improving international trade, in particular development of the tourism economy and the export of services, in order to become a permanent transformation of economic trends.

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