ASSESSMENT OF THE IMPACT OF TOURISM ON KEY ECONOMIC INDICATORS OF VARIOUS SECTORS OF THE NATIONAL ECONOMY BASED

Ayan Mirzayeva  Gunay Rahimli

Journal number 4 ∘ Ayan Mirzayeva ∘ Gunay Rahimli ∘
ASSESSMENT OF THE IMPACT OF TOURISM ON KEY ECONOMIC INDICATORS OF VARIOUS SECTORS OF THE NATIONAL ECONOMY BASED

ON THE INPUT-OUTPUT MODEL

Annotation. This paper evaluates the impact of investments in the tourism sector on various indicators of different sectors of the national economy. For this purpose, the 2021 input-output table was first grouped into 19 sectors according to the classification of economic activities. Based on this table, the input-output table, labor balance model, capital balance model, and equilibrium price model were applied to assess the effects of the tourism sector on the economy. The study identifies how investments allocated to the tourism sector influence total output, employment, and fixed capital both within the sector itself and in other sectors. Additionally, the impact of changes in the tourism sector’s value-added ratio on sectoral prices was determined. The findings of the research can be used in decision-making to ensure efficient use of investments and dynamic economic development.

Keywords:Input-Output Analysis; Tourism Investment Impact; Intersectoral Linkages; Economic Modeling; Public-Private Partnerships; Sustainable Economic Development; Evidence-Based Policy

Introduction

Government expenditures are one of the main tools used to regulate economic activity and support social development. These expenditures include investments directed toward areas such as infrastructure projects, education, healthcare, and social services. Public spending is used to implement economic policy, combat unemployment, ensure social equity, and stimulate economic growth. When properly directed, public expenditures can increase economic circulation and have a positive impact on the private sector as well [8].

The Input-Output Model presents the interconnections within economic systems within an analytical framework. This model demonstrates the flows between production and consumption and helps in understanding the structure of the economy. The goods and services produced by each sector for other sectors play a significant role in evaluating the dynamics of the economy and the effects of different economic policies [1]. For example, investments made by the state in infrastructure projects stimulate the development of the construction sector, which in turn increases demand for the products of other sectors.

To understand the complex structures of the modern economy, it is essential to deeply analyze the relationship between public expenditures and the Input-Output Model. Government financial policies play a key role in assessing the impact of expenditures directed toward various sectors of the economy. In this context, studying the effects of public expenditures on economic growth, social equity, and unemployment is crucial for shaping contemporary economic strategies. The Input-Output Model is designed to show how these expenditures are distributed across different sectors and provides a broad picture of economic activity. Ultimately, this approach facilitates strategic decision-making aimed at enhancing the effectiveness of economic policies and ensuring sustainable development [5].

Methodology

The intersectoral balance model is aimed at ensuring the efficient allocation of resources and economic equilibrium by taking into account the production and consumption relationships across various sectors of the economy. The static intersectoral balance scheme, which reflects the production process over a specific period (typically one year), presents data on both production and consumption sectors. This table clearly illustrates the roles and interconnections of different sectors within the economy. Both production and consumption indicators allow for tracking flows between sectors and evaluating economic equilibrium [6].

Table 1. Structure of the Input-Output Table

sahələri	Consumption sectors					Final output	Total output
sahələri	1	2	3	...	n	Final output	Total output
1	x11	x12	x13	...	x1n	y1	X1
2	x21	x22	x23	...	X2n	y2	X2
3	x31	x32	x33	...	X3n	y3	X3
...	...	...	...	x_ij	...	...	...
n	xn1	xn2	xn3	...	xnn	yn	Xn
Value added	v1	v2	v3	...	vn	v	-
Total output	X1	X2	X3		Xn	-	X

Let us assume that the scheme is presented in value terms. In this case, the value of xij located at the intersection of the i-th row and the j-th column represents the value of the quantity of output produced by sector i that is consumed in the production process of sector j. For example, if the first sector represents agriculture and the ninth sector represents tourism, then x₁₉ indicates the value of agricultural products consumed by the tourism sector, while x₉₁ reflects the value of tourism products consumed in the agricultural sector.

Overall, the values in the column x₁₁ , x₂₁ , x₃₁ , . . . , x_n1 show the use of outputs from both the first sector itself and from other sectors. Similarly, x₁₂ reflects the value of agricultural products used in the second production sector, while other values such as x₁₃, ... ,x_1n represent the demand of other sectors for agricultural products.

As can be seen, although the columns of the scheme are presented as consumption sectors, they actually reflect the demands of production sectors. Therefore, these columns are often referred to as intermediate demands.

Intersectoral technological relationships are measured using direct cost coefficients:

These coefficients show the amount of output from sector i that is required to produce one unit of output in sector j [3].

For example, if the first sector represents hospitality (hotels) and the second sector represents transportation services, the direct cost coefficient indicates how much output from the hospitality sector is used to produce one unit of total output in the transportation sector. Here, x₁₂ reflects the value of intersectoral flows from hospitality to transportation within the tourism sector, and X₂ represents the total output value of the corresponding service sector (e.g., hotel services).

This approach helps to better understand the costs and production structure of services within the tourism sector.

Thus, direct cost coefficients are proportionality factors that express the direct relationship between costs and production volumes:

This expression shows Xi as the value of intersectoral flows, aij as the direct cost coefficient, and Xj as the total output of the corresponding production sector. This approach helps to understand how costs are distributed in the production processes and how sectors interact with each other.

By using equation (2), this system of equations can be expressed as follows:

Here, Xi represents the total output produced in the i-th sector, X ij denotes the intersectoral flows, aij is the direct cost coefficient, and yi indicates the final demand. These equations describe the production and consumption relationships within sectors.

This system consists of n linear equations and represents mathematical relationships for both value and physical (natural) balances. Thus, this system plays a fundamental role in analyzing economic activity, allocating resources, and shaping economic policies. Properly constructed balances enable more efficient functioning of the economy. Additionally, when there is an increase in demand for goods and services in any sector, it alters the equilibrium, creating a new balance. This change can be evaluated using the following simulation equation:

Here, I is the identity matrix s called the total cost matrix. Then, this equation can be written as follows

This model represents the input-output model and allows evaluating the change in total output across all sectors resulting from a change in final demand ()for the product of any given sector [3].

It is also clear that when the total output increases to meet the demand of any sector, the number of jobs in the corresponding sectors also rises to accommodate the increased production. To assess this change, the labor balance model is used [4]:

Here, l is the vector of direct labor coefficients, calculated by dividing the number of employed persons in each sector by the total output of that sector. In other words, these coefficients represent the amount of labor required to produce one unit of output in each sector.

At the same time, it is clear that an increase in production volume also requires growth in fixed capital within these sectors, and this change is evaluated using the capital balance model [2]:

Here, K represents the quantity of existing fixed capital across sectors, and k is a vector indicating the amount of fixed capital required to produce one unit of output in each sector.

The intersectoral balance scheme also includes values for the final product (i.e., final demand) and value added. The final product covers the portion of total production remaining after intermediate demands are met and can be used for consumption, fixed assets, exports, and other purposes. Value added includes various financial indicators such as wages, depreciation allowances, net income, production taxes, and so on. When the costs and value added of all consumption sectors are summed, the total output is obtained.

Therefore, the following equation can be written:

Here, X j represents the total output of the consumption sector, ∑x_ij denotes the production flows directed to that sector from various other sectors, and vj represents the value added.

It is clear that when the value added coefficient of any sector changes, it causes a price increase both in that sector and in other sectors that use its intermediate products. This increase can be evaluated using the following simulation equation:

Here, p denotes the vector of price levels across sectors, v is the vector representing value added coefficients, and is the transpose of the direct cost coefficient matrix.

Analysis

Using the above analytical framework, it is possible to assess the impact of a 5 million manat investment allocated to the tourism sector on the total output, employment, and value of fixed assets in other sectors and across the country, as well as the effect of changes in the value added coefficient of this sector on the overall price level in the country. This model clearly demonstrates the interconnections between sectors, enabling the measurement of the economic impact of investments.

Table 2. The Impact of a 5 Million Manat Investment in the Tourism Sector on Total Output, Employment, and Fixed Assets in Other Sectors and Nationwide; and the Effect of a 50% Increase in the Value Added Coefficient in the Tourism Sector on Price Levels in Other Sectors and Nationwide

N	Sector names	Growth of investment costs in the tourism sector, million manat	Increase in the total output of sectors and the country, thousand manat	Change in employed population, persons	Change in fixed assets, thousand manat	Change in value-added rate, %	Change in price level, %
1	Agriculture, Forestry and Fishing		182.05	32	168.6		0.3
2	Mining and Quarrying		69.45	0	253.45		0.05
3	Manufacturing		456.15	8	386.3		0.75
4	Electricity, Gas, Steam and Air Conditioning Supply		100.25	1	609.65		0.2
5	Water Supply; Sewerage, Waste Management and Remediation Activities		12.95	1	268.25		0.4
6	Construction		108.85	3	95.85		0.35
7	Wholesale and Retail Trade; Repair of Motor Vehicles and Motorcycles		382.5	18	62.05		0.15
8	Transportation and Storage		695.25	14	1209.55		0.3
9	Accommodation and Food Service Activities	5	5027.5	220	5157.05	50	34.4
10	Information and Communication		54.45	1	92.25		0.15
11	Financial and Insurance Activities		146.25	2	232.75		0.05
12	Real Estate Activities		100	3	366.6		0.1
13	Professional, Scientific and Technical Activities		183.05	5	159.95		0.5
14	Administrative and Support Service Activities		53.4	6	46.55		0.5
15	Public Administration and Defence; Compulsory Social Security		1.45	0	2.45		0.55
16	Education		0.3	0	0.25		0.35
17	Human Health and Social Work Activities		2.55	0	3.5		0.3
18	Arts, Entertainment and Recreation		3.8	0	11.95		2.55
19	Other Service Activities		36.65	5	19.8		0.25
	Total / National Level		7616.9	319	9146.7		0.75

Summary

The results indicate that an investment of 5 million AZN directed towards the tourism sector will lead to an increase in turnover in hospitality, transportation, and service industries. This growth will not only raise overall output in the respective sectors but also significantly expand employment levels. At the same time, the value of fixed assets will increase as a result of investments and the development of these sectors.

Furthermore, a 50% increase in the value-added rate in the tourism sector is linked to its impact on the price level. This increase reflects a rise in the value of services produced by the sector, which will, in turn, trigger price growth in other industries. Using the Input-Output model, it is possible to accurately assess the impact of this price increase across various sectors of the economy.

This approach demonstrates the extensive influence of the tourism sector not only within itself but also across the broader economy. Thus, the positive economic outcomes of the 5 million AZN investment and the increase in value-added stimulate demand and consumption in related sectors, contributing to sustainable economic development.

Sectoral Analysis

The presented table includes indicators covering various economic sectors. These indicators were prepared to analyze the economic effects of investment in the tourism sector:

Agriculture, Forestry, and Fishing: Expenditures amount to 182.05 thousand AZN, with an increase of 32 employed individuals, fixed assets growing by 168.6 thousand AZN, and a 0.3% rise in price levels. This demonstrates agriculture\\\'s positive impact on tourism.

Mining Industry: Expenditures are 69.45 thousand AZN, fixed assets increase by 253.45 thousand AZN, and prices rise by 0.05%. This sector supplies energy and resources essential for tourism.

Manufacturing Industry: Expenditures total 456.15 thousand AZN, employment rises by 8 people, fixed assets increase by 386.3 thousand AZN, with a 0.75% price increase. Manufacturing plays a vital role in producing goods supporting tourism.

Electricity, Gas, and Steam Production: Expenditures are 100.25 thousand AZN, employment grows by 1 person, fixed assets increase by 609.65 thousand AZN, with a 0.2% price rise. Energy production is crucial for tourism development.

Water Supply and Waste Management: This sector records 12.95 thousand AZN in expenditures, 1 new employee, 268.25 thousand AZN in fixed assets growth, and a 0.4% price increase.

Construction: Expenditures reach 108.85 thousand AZN, employment rises by 3, fixed assets grow by 95.85 thousand AZN, and prices increase by 0.35%. Construction plays a key role in developing tourism infrastructure.

Trade and Vehicle Repair: Expenditures of 382.5 thousand AZN, employment up by 18, fixed assets change by 62.05 thousand AZN, with a 0.15% price increase.

Transport and Storage: This sector shows 695.25 thousand AZN in expenditures, employment growth of 14, fixed assets increasing by 1209.55 thousand AZN, and a 0.3% price increase. It provides critical transport services for tourism.

Accommodation and Food Services: Expenditures stand at 5,027.5 thousand AZN, employment rises by 220, fixed assets grow by 5,157.05 thousand AZN, with a 10% increase in value-added rate and a 34.4% rise in prices. This sector directly reflects tourism’s economic impact.

Information and Communication: Expenditures of 54.45 thousand AZN, employment growth by 1, fixed assets up by 92.25 thousand AZN, and 0.15% price increase.

Financial and Insurance Activities: Expenditures of 146.25 thousand AZN, employment up by 2, fixed assets increase by 232.75 thousand AZN, with a 0.05% price rise.

Real Estate Activities: Expenditures reach 100 thousand AZN, employment rises by 3, fixed assets increase by 366.6 thousand AZN, and prices increase by 0.1%.

Professional, Scientific, and Technical Activities: Expenditures at 183.05 thousand AZN, employment grows by 5, fixed assets increase by 159.95 thousand AZN, and prices rise by 0.5%.

Administrative and Support Services: Expenditures of 53.4 thousand AZN, employment up by 6, fixed assets rise by 46.55 thousand AZN, with a 0.5% price increase.

Public Administration and Defense; Social Security: Expenditures of 1.45 thousand AZN, fixed assets increase by 2.45 thousand AZN, price levels rise by 0.55%.

Education: Expenditures of 0.3 thousand AZN, fixed assets increase by 0.25 thousand AZN, with a 0.35% price rise.

Healthcare and Social Services: Expenditures reach 2.55 thousand AZN, fixed assets increase by 3.5 thousand AZN, and prices rise by 0.3%.

Arts, Entertainment, and Recreation: Expenditures at 3.8 thousand AZN, fixed assets grow by 11.95 thousand AZN, with a 2.55% price increase.

Other Services: Expenditures of 36.65 thousand AZN, employment rises by 5, fixed assets increase by 19.8 thousand AZN, and prices increase by 0.25%.

Overall (Country-wide): Total expenditures amount to 7,616.9 thousand AZN, employment increases by 319 individuals, fixed assets grow by 9,146.7 thousand AZN, with a 0.75% rise in prices.

Conclusion

This analysis comprehensively demonstrates the positive impact of investments in the tourism sector on other economic sectors. The indicators confirm that tourism not only affects its own sector but also generates demand in other areas, playing a significant role in the overall national economy. Consequently, the development of tourism contributes substantially to the country’s economic independence and sustainable growth. This approach underlines the strategic importance of efficient investment use and dynamic economic development.

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