Impact of Inbound Tourism in Kenyan Economy: An Analysis Using a Computable General Equilibrium Model

In both developing and developed countries tourism is often regarded as an economic activity of immense significance creating thousands of jobs. However, calculations dealing with the economic nature of tourism are often derived from input-output models, which largely overstate its effects on employment by assuming linear responses and highly elastic supplies of goods, services and labor. The purpose of this study is to develop and apply a computable general equilibrium approach to estimate the effects of growth in tourism spending on the Kenyan economy as a whole and on particular sectors within it. The results indicate that the economic benefits from tourism expansion in Kenya are small. The paper concludes with a discussion of the policy implications and research limitations.