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The Economic Impact of Inbound Tourism in Kenya: A CGE Analysis

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  • Eric Tchouamou-Njoya@hs-bremen.de

Abstract

Tourism is an economic activity of immense significance for both developed and developing countries. In recent years, computable general equilibrium (CGE) models have been widely used to investigate the economic effects of tourism. In this paper a tourism CGE model is applied to estimate the impact of growth in the tourism sector on national welfare in Kenya.The model is neoclassical in structure. Its main features involve profit maximization by producers, utility maximization by households, perfect mobility of factors, and competitive markets. It can be described as a static, small open economy, single-country CGE model extended to incorporate international tourism. The model equation follows closely that in Dervis et al. (1982), Robinson et al. (1990) and in Devarajan et al. (1994), which involve specification of a CGE model in terms of non-linear algebraic equations and addressing them directly with numerical solution techniques. The model is solved using GAMS.Additional tourism expenditure has the potential to bring positive economic benefits to Kenya and reduce income inequality. However, urban residents are likely to benefit more from tourism expansion than rural residents unless government invests in improving ground transport services.

Suggested Citation

  • Eric Tchouamou-Njoya@hs-bremen.de, 2012. "The Economic Impact of Inbound Tourism in Kenya: A CGE Analysis," EcoMod2012 3901, EcoMod.
    • Handle: RePEc:ekd:002672:3901
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    References listed on IDEAS

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