Impact of Tourism on the Economy of Kenya: Tourism Gross Fixed Capital Formation Multiplier Effects

Abstract

The primary objective of this study was to evaluate the economic impact of tourism on private and public investments namely Gross Fixed Capital Formation (GFCF). The input-output/SAM models were used to estimate the impacts of investments in terms of output production, employment generation, labour income earnings and total value creation. The relationships between expenditure and output, and income and employment (direct, indirect or induced) were described by multipliers. Data for analysis was sourced from EORA multi-region input-output table (MRIO) database: http://www.worldmrio.com/. Tourism gross fixed capital formation, derived from Kenya TSA, was used as the basis for calculating tourism multipliers and their associated effects. Tourism gross fixed capital formation of Kshs 133 billion created 455 thousand jobs, generated Kshs.63.8 billion labour income, added Kshs.166 billion to total value in the economy and Kshs 277.6 billion to total output. In this paper, the impact of tourism gross fixed capital formation was analyzed through input-Output and SAM models. Future studies could re-estimate the multipliers by adopting Computable General Equilibrium (CGE) models.