The economic impact of international inbound tourism on the South Korean economy and its distributional effects on income classes

The first objective of this study is to estimate the economic impact of international inbound tourist expenditure on the South Korean economy. An Input-Output (I-O) model is developed to derive tourism multipliers in terms of output, income, employment, value-added, and import as a basis for assessing the economic impact of tourism. Distinct tourism multipliers are derived for six sectors of the tourism industry, namely: accommodation, food and beverage, tour and transportation, entertainment, shopping, and miscellaneous service sectors. The I-O model to be developed in this study differs from previous Korean I-O models in that it estimates the induced effect as well as the direct and indirect effects of tourism. The results indicate that the tourism industry is high labor and wage intensive in nature. Furthermore, the tourism industry tends to produce a lower propensity to make purchases from other industries and be less dependent upon imports, as compared to other major industries in the Korean economy. It was also found that international inbound tourism was significant in generating foreign exchange earnings to the economy.The second objective of this study is to measure the income distribution of tourism among different social groups in South Korea. The distribution of income is an important social policy issue, or "social equity and fairness", in modern welfare countries, but has not been previously examined in the area of tourism. An income distribution model is developed to investigate whether the tourism industry contributes to an equalizing distribution of income among different social classes compared to other major industries in the Korean economy. Two widely used measurements of income inequality are employed in this study: the Lorenz curve and Gini coefficient. The findings show that the Lorenz curve for the tourism industry depicts the large concavity and its Gini coefficient is estimated to be high, when compared to the major industries in the economy. This implies that the tourism industry is not likely to produce a more equal distribution of income among social classes than the majority of industries in the economy.This study also analyzes the performance of the tourism industry in relation to the national economic policy objectives of the Korean government. Two major export-oriented manufacturing sectors, the wearing apparel and motor vehicle sectors, are chosen for a comparative analysis with two major tourism sectors, the hotel and restaurant sectors. The results reveal that the tourism sectors perform better in generating income, employment, and value-added, and less leakages from imports than the manufacturing sectors. However, in terms of intersectoral linkages and income redistribution, the tourism sectors are less efficient than the manufacturing sectors.