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Development Policy Review, 2013, 31 (2): 177-202

Assessing the Role of Tourism in Poverty Alleviation: A Research Agenda


Paul Winters, Leonardo Corral and Adela Moreda Mora
Understanding the tourism-poverty link is critical if tourism is to be used as a mechanism for reducing poverty. Yet, the available empirical analysis is insufficient for this. This article proposes a research agenda for closing this gap in the literature. It argues that, while analysing the link poses peculiar challenges, models exist to do so. Second, it contends that the key question is not whether the link exists but under what conditions it is strongest. Finally, it maintains that the best way to analyse the link is to incorporate accurate diagnosis and evaluations into tourism projects, using the approaches and concepts of the literature on impact evaluation.
Keywords: Tourism, development, poverty, impact evaluation

Introduction

Tourism is expanding rapidly around the world and is increasingly seen as a potential driver of economic development and a means of alleviating poverty in developing countries. This view has been particularly promoted by the World Tourism Organisation which states that the power of tourism one of the most dynamic economic activities of our time can be more effectively harnessed to address the problems of poverty more directly (WTO, 2002: 17). While there is a broad consensus regarding tourisms potential to alleviate poverty, the problem noted in the literature is the lack of empirical evidence of the extent of this link (Mitchell and Ashley, 2010; Goodwin, 2007; Jamieson et al., 2004). Even though the potential mechanisms through which tourism can alleviate poverty are well established, the magnitude of these links is not. For example, Mitchell and Ashley identify three primary pathways through which tourism makes an impact on poverty: (i) direct effects, (ii) secondary effects, and (iii) dynamic effects. Yet, they note that insufficient analysis has been conducted in these areas, arguing that tourism researchers could try harder to establish tourism-poverty links (2010: 135). On similar lines, Jamieson et al. state that there is a need for more sophisticated modelling to better understand tourism-poverty linkages (2004: 33).
*Respectively, Associate Professor, Department of Economics, American University, 4400 Massachusetts Avenue, NW, Washington, DC 20016, USA (winters@american.edu); Lead Economist, Office of Strategic Planning and Development Effectiveness; and Lead Tourism Specialist, Environment, Rural Development and Disaster Risk Management Division, Inter-American Development Bank, Washington, DC 20577, USA. They wish to thank participants at the workshop on Tourism for Development held in Washington, DC in October 2010 for helpful feedback on an earlier version of this article. Paul Winters is grateful to the Office of Strategic Planning and Development Effectiveness at the IDB for financial support for this research. The views expressed here are those of the authors and should not be attributed to the IDB or its member countries.
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In this article, we first argue that models do exist to improve our understanding of this link, even though analysing it poses peculiar challenges. In particular, it is possible to investigate the link using simulations and data collected for the purpose of conducting such an analysis. In fact, this has already been done in the case of the Galapagos (Taylor et al., 2003; 2009) and this and similar models can be applied elsewhere. The problem is that these models have rarely been used for tourism research and little concerted effort has been made to quantify the link. Second, we contend that simply attempting to quantify the link between tourism and poverty is an insufficiently interesting question. The link, in some form, almost certainly exists. The interesting question is under what conditions this link is likely to be strongest. In answering this question, we believe that three hypotheses should be carefully considered and tested. The first is that the link is determined by the broader context, or macroenvironment, in which tourism investment occurs, suggesting that the relationship depends on wage conditions, infrastructure access, location of tourist activity, and so on. Second, the tourism-poverty link depends on the tourism-specific assets and institutions that are put in place to promote tourism development; that is, the link primarily depends on the relationships that are consciously established between stakeholders in tourism destinations, including those in the private and public sectors. Third, it is the type of tourism that determines the link; that is, whether some products and markets of tourism such as cruise ship, cultural tourism, sun and beach, ecotourism, etc., or international, domestic, high-end or low-end are more or less conducive to poverty alleviation. While each of these factors is likely to play a role in the tourism-poverty link, we argue that it is the stakeholders relationships that matter most and that one role of the public sector, in coordination with donors, is to foster the development of a tourism-specific institutional structure conducive to poverty alleviation. Of course, the lack of empirical evidence leaves this as a hypothesis to be tested. Third, we maintain that the best way to address questions regarding the role of tourism in development and poverty alleviation is to incorporate accurate diagnosis and evaluations into tourism projects, funded either by governments, multilateral development banks, bilateral development agencies or by non-governmental organisations, and to use the approaches and concepts of the literature on impact evaluation to assess the impact of public investment in tourism. This, combined with the general strengthening of data collection and improved approaches to assessing tourism, is the best means to determine the relationship between tourism and poverty alleviation. The objective of this article is therefore to propose an agenda for assessing the connection between tourism and poverty alleviation in developing countries. Towards this end, the next section provides a brief overview of the theoretical link between tourism and poverty and the issues in assessing this link. Since these have been discussed elsewhere, the section provides the highlights of these relationships and summarises the literature. The following three sections (Sections 3-5) focus on elaborating the three propositions noted above. Conclusions and a summary of an agenda for future research are presented in the final section.

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Tourism-poverty link: conceptual framework and issues

Expanding tourism is not a development objective in itself. The benefits of tourism come from the fact that the receipts from tourism have an impact on local economies as well as on areas linked to them. Whether international or domestic, tourism brings consumers to the product and tourists consumption of goods and services at the location provides the benefits of tourism. Tourism is therefore akin to exports in that goods and services are provided to distant consumers, except that the consumer comes to the product rather than vice versa and the benefits are at least partially provided directly rather than through external intermediaries. It is this direct tie to consumers that is often highlighted in considering the poverty-reduction potential of tourism, since it raises the possibility of linking the poor directly to consumers. In this section, we consider the relationship between tourism and development and more specifically, poverty alleviation. Details of the theoretical relationship between tourism and poverty are beyond the scope of this article and are noted elsewhere, most recently by Mitchell and Ashley (2010). In this section, the key aspects of the relationship are highlighted, focusing on the (i) direct, (ii) secondary and (iii) dynamic effects. The direct impacts of tourism come from tourists purchasing goods and services, which provide non-labour income to owners of businesses serving tourists and labour income to the employees of those businesses. The immediate beneficiaries of these expenditures are thus the owners of the business and the labour used in the industry. Whether tourism has a direct monetary benefit for the poor depends on whether they own enterprises in either the formal or the informal economy that sell to tourists, or if they work for those enterprises. They are more likely to work for tourist enterprises if the latter hire unskilled labour, which will include the poor (or formerly poor). A number of factors may influence who will directly benefit from tourism, including labour-market conditions, the formality of the tourist economy, public policy and investment in tourism and tourism-related infrastructure, the relationship between the public and private sectors, and the type of tourism as well as the types of tourists. Understanding the direct impact of tourism, then, requires considering these factors. The secondary effects of tourism are the result of the spending of receipts earned within the sector. They are divided in the literature between indirect effects, which refers to the purchase of inputs from other firms to support the tourism industry, and induced effects, which refers to the spending of income earned by tourist-business owners and employees (Dwyer et al., 2004). These intersectoral linkages occur because tourism businesses need to buy goods and services from non-tourism sectors, and owners and employees of tourism businesses purchase goods and services outside the sector. Furthermore, these purchases generate additional rounds of spending, creating additional benefits. In addition to privatesector spending, the government may obtain revenue from the tourism industry, which, depending on how it is spent, can influence the local economy (Blake et al., 2008). The combination of these various secondary effects creates a stream of money flows, the sum of which can be referred to as a multiplier effect. Studies of tourism multiplier effects suggest that the secondary effects of tourism are of the order of 60% to 120% of the direct effects, so that every tourism dollar spent has a value of $1.60 to $2.20 in income generated (Mitchell and Ashley, 2010). Of course, along with influencing the flow of income in the economy, the secondary effects of tourism can also influence prices and wages in the
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economy. As with direct effects, the influence of these secondary effects on the poor depends on whether they own or are employed in linked activities, which ultimately depends on a number of factors, but which provides an avenue for public interventions aimed at linking the poor to the sector. In terms of the overall local benefits of tourism, there is a question of how linked the tourism economy is to the local economy, and concerns have been raised about the leakage of tourism expenditures to outside the tourist region, thereby reducing the multiplier effect within the region. First, some of the tourism costs of transportation and the planning of visits will be undertaken outside the destination. Furthermore, since not all goods and services can be purchased locally, there is inevitably a share of tourism receipts that will be spent on products from other locations. But when local linkages are limited, issues are raised about the value of the tourism industry to local development and poverty alleviation. This is potentially an issue if resources are not being efficiently allocated, and efficiency gains can be made through investments that minimise leakages, thus increasing the local multiplier effect. The final effect of tourism relates to its long-term or dynamic effects on the local economy. These dynamic effects refer to the benefits that tourism provides by inducing greater investment in infrastructure, human capital formation, business development, agricultural production and similar activities. This investment can come from the private or the public sector and may be partially the result of increased government revenues due to tourism. While investment may be primarily for the tourism sector, it is likely to have spillover effects on other activities, creating a more dynamic economy in the long run. This, in turn, will have impacts on development and poverty alleviation. In the literature, this is referred to as the tourism-led growth hypothesis, and it postulates, like the export-led growth hypothesis, that tourism can become a main determinant of overall long-run economic growth (Balaguer and Cantavella-Jorda, 2002). The manner in which this occurs is through enhancing economy-wide efficiency and through financing the import of foreign capital goods, which raises the level of capital formation (Nowak et al., 2007). Conceptually, these three mechanisms through which tourism can influence poverty are well understood. The challenge has not been in understanding the conceptual underpinning of this link, but rather in obtaining empirical evidence on the magnitude of the link so as to shed light in deciding on the most effective interventions. To accurately assess the magnitude of the link requires identifying empirical approaches that allow the tourism-poverty relationship to be determined. In the next section, these approaches are briefly discussed and a particular set of approaches is argued to be the most promising in terms of identifying at least the static nature of the relationship between tourism and poverty.

Approaches to understanding the tourism-poverty link

Two general empirical approaches to potentially understanding the tourism-poverty link can be identified. The first approach includes a range of simulation models from simple input-output models to more complicated multiregional computable general equilibrium models and economy-wide models. The second approach includes econometric analysis of tourism-growth linkages using time-series macroeconomic data, and similar, though less
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common, analysis of tourism-poverty linkages. In both sets of models, the focus tends to be on the influence of tourism on income generation or growth as opposed to explicitly on poverty. Each of these is considered below.

3.1 Models to assess direct and secondary effects


The primary goal of tourism-based simulation models is to quantify the total impact of tourism on the economy or the impact of short-run growth in the industry. The first step is to determine the direct impact of tourism through increased tourist receipts. Information on how tourists spend their income on goods and services for their travels is required to know the manner in which tourist receipts flow into the economy. With this information, a sense of the direct impact of tourism on income earnings and employment can be determined. The second step is then to ascertain how tourist expenditures flow through the economy through the spending of tourism enterprises, owners and employees and, subsequently, through nontourism-sector firms and individuals that receive this expenditure. The rounds of spending flows need to be mapped. It is in conducting this step that a model for understanding these linkage effects is necessary. The most basic models for mapping the economy-wide effects of tourism are inputoutput (IO) models and social accounting matrices (SAMs). IO models map flows between firms within an economy, taking account of all income and all expenditures by the industry. A SAM follows along similar lines, but adds additional flows to other institutions such as households, the government and the rest of the world. In both models, the expenditure and income flows within the economy being mapped need to add up so that all economic activity is included. The models are defined for some geographic area, such as a country as a whole or a region or state within the country. For understanding tourisms impact on the economy, a tourism sector needs to be identified, as do its links to other industries, households, government and the rest of the world. Defining what is included in the tourism sector presents challenges, although the definitions are becoming systematised through the use of Tourism Satellite Accounts and recommendations on their creation (United Nations, 2008). Once the tourism sector is defined with all the flows into and out of the sector, the model can be used to calculate the multiplier effect of additional tourism spending in the economy. IO models and SAMs have methodological limitations that restrict their usefulness in analysing the impact of tourism. Key among these limitations is the fact that the models do not include prices or wages. This limits the ability to assess the impact of shifts in tourism demand, since it does not factor in that (i) tourists and other consumers will respond to price changes, and (ii) tourist businesses and other firms will respond to changes in input prices and wages (Blake et al., 2001). These limitations can potentially create biased estimates of tourism impact and are the motivation for moving to the use of Computable General Equilibrium (CGE) models. CGE models take the SAM as the basic data for the economy, but add in behavioural assumptions and constraints reflecting a view of the economy founded in economic theory. Using theoretical models of the economy, parameters for these models estimated using real-world data and data on the economy embodied in the SAM, CGEs can simulate the functioning of an economy. As with the SAM, the CGE can incorporate the role of tourism in the economy, provided a tourism account is included along with the necessary model parameters that define the relationship
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between tourism and the rest of the economy. The CGE then allows for an assessment of the role of tourism by examining how changes in tourism receipts are transmitted through an economy. Because it incorporates wages, it allows an estimate of the influence of tourism on employment and earnings. The value of a CGE model in assessing the impact of tourism is dependent on the manner in which the model is created and, in particular, on the underlying SAM. CGEs tend to be aggregate models that look at an economy as a whole. As such, while the overall effects of tourism can be assessed, it is hard to identify where the benefits of those effects might be concentrated, including whether most of the gains are in the regions where tourism investment is occurring. Furthermore, such models may not be appropriate for smaller local tourism activities. This is less a result of the approach, but rather because of the aggregate level of the data usually incorporated in the model. One solution to this problem is to build CGEs and the underlying SAMs at the regional or local level and focus the analysis at this level. Another alternative is to use multiregional CGE models that incorporate greater detail at the local level and include relationships between regions. The level of aggregation of CGEs is also a key issue in assessing the poverty effects of tourism using CGE models. In the underlying SAMs, households may not be sufficiently disaggregated to get a sense of poverty effects. That is, a single or a limited number of household categories are identified in the SAM, and poor households are not separately recognised in any way. Using a CGE to assess the impact of growth in tourism receipts can provide an estimate of gains in employment and income through greater wage earnings and tourism profits. However, without a clear categorisation of households into groupings that are linked to economic well-being, it is not possible to determine whether jobs and wage gains went to poor households. The link between poverty and tourism cannot be determined. An alternative option for evaluating tourism related to CGE models is disaggregated economy-wide models, which combine CGE models with microeconomic models, such as agricultural household models (Taylor et al., 2005). The difference between these models and pure CGE models is that (i) the data come from data collected at household and firm levels in the region of interest, and (ii) the models can incorporate specific microeconomic issues, such as market limitations. This approach has been used by Taylor et al. (2003 and 2009) to assess the impact of tourism on the Galapagos. The benefits of these models lie in the fact that they integrate the strengths of CGE models in their ability to incorporate linkages within the economy and to include wage and price effects, while at the same time being locally relevant by including local data collection. The downside of this is that they are data-intensive, which of course comes with a cost. Few models explicitly analyse the impact of tourism on poverty. For Brazil, Blake et al. (2008) use a CGE modelling approach to provide an economy-wide analysis of the distributional effects of tourism expansion. They are able to conduct this analysis since the underlying SAM is constructed to include four categories of household (lowest income, low-income, medium-income and high-income), with the lowest group defined as earning less than an approximation of the poverty line. Their results show that there is a welfare gain to Brazil of $0.45 for every $1 unit of additional tourism spending and that tourism benefits the lowest income sections of the Brazilian population. However, it is the lowincome households (not the lowest income) that are the main beneficiaries of tourism
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expansion through higher earnings and prices. Furthermore, it is the high and medium groups that gain more from tourism-induced expansion of government revenue and spending. Examining tourism in Thailand, Wattanakuljarus and Coxhead (2008) use a CGE model to look broadly at the issue of whether tourism-based development is good for the poor. They find that, while tourism does increase aggregate household income, it worsens income distribution. The reason is largely owing to the fact that tourism is not relatively labour-intensive in Thailand. Thus, the gains from tourism do not accrue to unskilled labour and instead tend to benefit other factors of production. Since other factors gain relatively more, income inequality appears to be exacerbated. While providing broader insights into the general equilibrium effects of tourism on inequality, the article says little about the direct link between tourism and absolute poverty. Using a disaggregated model for the Galapagos, Taylor et al. (2003 and 2009) document the link between tourism and other industries on the islands, showing larger effects than studies that just examine direct tourism expenditures. They also show that, while there were large increases in income largely driven by the expansion of tourism, there were only limited gains in income per capita within the islands because of substantial migration from the mainland. In terms of poverty, the most that can be said is related to income gains in certain sectors, such as fishery and agriculture, which tend to be dominated by poorer producers. While the use of simulation models to examine the link between tourism and poverty has been rare, the potential for using such models clearly exists. CGEs and other economywide models have been used in a number of cases to address poverty issues, including issues such as trade and poverty, environmental policy and poverty, and agricultural policy and poverty. The key in these cases has been the creation of CGEs or economy-wide models with disaggregated household-level data as in the case of Blake et al. (2008), or the creation of models linked to microsimulations that use poverty data. In these cases, the analysis can assess the impact of policies on poverty. For example, Taylor et al. (2005) use a disaggregated, rural, economy-wide model to assess the impact of maize-price changes in Mexico and examine the impact on different farm types using land-size categories as an indicator of wealth. The potential to analyse tourism-poverty links clearly exists.

3.2 Models to assess long-term or dynamic effects


The long-term or dynamic effects of tourism on development have been primarily assessed through the use of macroeconomic time-series data on tourism (usually international tourism) and economic growth. The question that dominates this literature is the role of tourism in inducing economic growth. Like exports, tourism at least international tourism links economies to the rest of the world and is an earner of foreign exchange. The literature on the export-led growth hypothesis posits that exports (i) provide foreign exchange for importing capital goods for capital formation, and (ii) enhance efficiency through competition with foreign firms and through the creation of greater economies of scale than would occur without access to foreign markets. A similar argument can be made for tourism, and this hypothesis can be tested (Balaguer and Cantavella-Jorda, 2002). The hypothesis has primarily been tested for developed countries, in particular Spain with its large tourism sector. Balaguer and Cantavella-Jorda (2002) confirm the hypothesis
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through co-integration and causality testing, with their results indicating that economic growth in Spain has been responsive to the expansion of international tourism and that external competition has played an important role in Spanish economic growth. Along similar lines, results of an analysis by Nowak et al. (2007) support the hypothesis that tourism earnings finance the import of capital goods, which affects the growth of the Spanish economy. Furthermore, they are not able to reject the hypothesis that tourism improves the efficiency of productive resources. Results from developing countries are in line with these results. Narayan et al. (2010) find a link between international tourism receipts and economic growth in four Pacific Island economies heavily reliant on tourism. For Latin America, Fayissa et al. (2009) using panel data from 17 countries in the region find that tourism revenue is positively linked with economic growth. Evidence from 42 African countries produces similar results (Fayissa et al., 2008). The aforementioned studies focus on the tourism-economic growth link as opposed to a tourism-poverty link. While economic growth is necessary to induce poverty reduction, it is not a sufficient condition. Few studies have sought to directly examine the long-term link between tourism and poverty. One study from the United States by Deller (2010) uses a spatial analysis to examine the impact of tourism and recreation activities on rural poverty. The analysis finds that the expansion of certain recreational activities (golf, tennis and swimming facilities) does put downward pressure on poverty rates, while others have neither negative nor positive effects on poverty. The results at least challenge the notion that tourism and recreation generate low-income jobs in developed countries. For developing countries, Croes and Vanegas (2008), using data from Nicaragua, find a causal link not only between tourism and economic expansion, but also to poverty reduction as measured by the poverty headcount. They conclude that the empirical evidence suggests that tourism has the potential to help Nicaragua reduce poverty.

3.3 Moving forward


Clearly, the empirical evidence on the tourism-poverty link is limited and insufficient to provide investment and policy guidance, and more should be done. Additional studies using time-series data and empirical approaches in developing countries would, of course, be helpful in establishing the role tourism plays in economic growth, development and poverty alleviation. Yet, the limitation of these studies lies in the fact that, while they provide insight into the value of developing-country governments investing in tourism, they do not provide insight into the types of investment the government should promote, and are unlikely to do so in the future. On the other hand, CGE and economy-wide models have the potential not only to help assess the tourism-poverty link, but also, if used wisely and in conjunction with a careful diagnosis of the tourism sector, to provide insights into the types of public investment that are likely to enhance the value of tourism in poverty alleviation. The primary limitation of these models has been in the lack of disaggregated household-level information and in particular the identification and inclusion of poor households. As argued above, overcoming this limitation is possible. Of course, the value of these models will be limited if they are not employed carefully, with forethought about the questions that should be asked with them. The next section puts forward a few key questions.
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Tourism-poverty link: hypotheses to test

If governments wish to promote tourism as an engine of economic growth and a mechanism to reduce poverty, the key question they need to answer is under which conditions the link between tourism and poverty is likely to be strongest. Indeed, a deeper understanding is needed as to why in some destinations an important portion of tourist expenditure is spent on imports or repatriated by foreign workers and companies, while in others the tourism sector has successfully stimulated linkages with different sectors of the local economy. Furthermore, a greater comprehension of when local tourism links are likely to benefit poorer households in local communities is required. In this section, we consider the general factors that are likely to influence the link between tourism and poverty. Figure 1 presents a framework for analysing key factors that can directly or indirectly determine the effectiveness of tourism in achieving local development and povertyalleviation goals, and hence require in-depth understanding. Specifically, we focus on three factors noted in the Introduction (i) the broader context, characterised as economic forces and other external forces, such as natural disasters, that influence the evolution of the tourism sector; (ii) the destinations tourism-specific assets and institutions, which include the natural, human, physical, and other forms of capital as well as institutions such as stakeholder relationships that govern the destination and underpin its potential; and (iii) the type of tourism, meaning the tourism products and markets that constitute the vehicle for achieving development results. From a development-objective point of view, the aim is to identify interventions that can alter this interplay of factors to deliver the desired outcomes discussed in Section 2 of this article; mainly, promoting economic growth that maximises the multiplier effect (minimises leakages), provides substantial benefits to the poor, and optimises government revenues that can be reinvested into enhancing the destinations assets. In the following sub-sections, we discuss why each factor might be considered relevant for defining the tourism-poverty link and what evidence exists in support of each view.

4.1 The broader context


The evolution of the tourism economy can depend largely on the context in which the industry develops, which is primarily a function of government economic policies, and largely outside the realm of influence of actors within the sector. Global forces, or the general macroenvironment, are widely recognised as important factors to consider in managing tourism destinations.1 Among other factors, regulations about foreign ownership of assets (hotels, restaurants and properties), rules of foreign direct investment, exchangerate policies, labour-market regulations and how they influence hiring and wages, regulation and policies in other markets, the education system that determines the availability of skilled labour, and public infrastructure investment can all influence the workings of the tourism industry. Not only will the broader context influence the direct effects of tourism on poverty, but also the secondary effects since these factors have an

1. See, for example, the discussion of the importance of the macroenvironment in Chapter 4 of Ritchie and Crouch (2003).
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Figure 1: Assessing the role of tourism in poverty alleviation: a framework for analysis

Destination tourism assets and institutions Natural capital Physical capital Stakeholder relationships Human capital Other capital Other institutions

Economic forces

Ownership & investment regulations

Labour market conditions Tourism products and markets

Market functioning & regulation

Exchange rate

Competitors

Cruise ships Nature International High end

Cultural Sun and beach Domestic Low end

Mainstreaming poverty alleviation in investment decision making

Other external forces Desired results of tourism expansion Economic growth High local multiplier effect (minimise leakage) Substantial benefits to the poor Government revenue generation

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Natural disasters Impact Poverty alleviation Local employment & income generation

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Terrorism

International politics

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impact on the manner in which tourism receipts are transmitted through the economy, and ultimately whether the poor benefit. One key issue that has been raised about the broader context relates to the ownership of tourism assets, finance and knowledge, which at least partially depends on government rules regarding tourism investment. Through its regulations, investments and actions, the government influences the conditions in which private investment ensues. In particular, concerns are often raised over foreign ownership of tourism businesses. Sindiga (1999) highlights ownership and power distribution as key in determining who actually gets the (direct) tourism receipts. Direct foreign investment in developing destinations may occur in the form of complete ownership or joint ventures with local partners. The different combinations of bargaining power and control under both options influence who obtains the larger share of tourism receipts. Under conditions of complete foreign ownership, situations of dependence are hypothesised to arise with few linkages between tourism and the local economy (Britton, 1982; Brohman, 1996; Khan, 1997; Lacher, 2008). Under joint ventures, where in principle power is more likely to be symmetrically allocated, direct foreign investment means co-operative access to tourism markets and benefits. However, if foreign companies possess a high level of negotiating power, even under joint-venture schemes, they may establish an advantageous relationship in which all the risk lies with the host country. This is, for instance, potentially the case of foreign tour operators that do not offer compensation to hoteliers for unused capacity when demand is lower than anticipated within the contract period (Sinclair et al., 1992). Who obtains the receipts of tourism depends on investment policies, and this in turn is likely to influence how those receipts are used. Along with asset ownership, government policy influences the ability to hire labour and the terms under which those labourers will be hired, including the cost of the labour. As Banerjee and Duflo (2008) point out, a key characteristic of the middle class around the world is that they have steady, well-paying jobs. They tend not to run businesses, except as a strategy to supplement income, and appear willing to abandon those businesses for steady wage employment. Even in rural areas, a positive correlation is found between the share of income earned from rural non-farm wage employment and overall income levels (Winters et al., 2010). Whether workers can get steady, well-paying jobs in the tourism industry or in the secondary industries linked to the sector depends on the functioning of labour markets and the type of labour (skilled or unskilled) available. Even beyond labour markets, how markets function in an economy, including whether they exist and the degree to which they are regulated, taxed or subsidised, can determine the manner in which tourism develops and influences the rest of the economy. For example, if the banking sector is poorly developed and there is restricted access to credit, including through microfinance institutions, the ability of entrepreneurs to take advantage of opportunities stemming from tourism may be limited. If agricultural markets are not well developed or output does not meet industry quality standards, the tourism industry may seek agricultural products elsewhere. In particular, linkages between tourism and the local economy may depend largely on, if and how local markets function. Beyond these economic considerations, other general non-economic factors, including climatic, environmental, sociocultural, political, geographical and demographic forces, clearly affect the sector (Ritchie and Crouch, 2003). For example, the prevalence of natural
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disasters and local vulnerability to disasters will influence the manner in which the sector develops, as will terrorism and international political considerations. Given the role of the broader context in the evolution of the tourism sector, it may play a key role in determining the tourism products and markets that develop and how those products and markets influence ultimate objectives of economic growth, high local multiplier effects, poverty reduction and enhanced government revenue. Testing this hypothesis would require analysing tourism in different contexts to see, for example, if tourism has a greater poverty-reducing benefit when tourism enterprises are owned by foreign companies or by local entrepreneurs, or when labour markets have more regulation such as minimum wage laws, as opposed to when regulations are minimal. By empirically examining tourism in different contexts, the importance of these factors in determining the desired outcome can be examined, and potential interventions can be identified to mitigate negative unintended consequences.

4.2 The destinations tourism assets and institutions


The broader context is unlikely to be the primary factor that determines the role of tourism in poverty alleviation. Rather, the evolution of the sector and how it is linked to the rest of the economy, including the poor, is likely to be a function of the destinations tourismspecific assets and institutions what Ritchie and Couch (2003) refer to as the microenvironment of the destination. Assets refer to the endowment of the tourism destination, including the natural beauty, the physical infrastructure, the availability of specialist skilled labour, and the cultural factors that make a destination attractive to tourists. While assets influence the type of tourism products and markets, in this section we focus primarily on the institutional and governance structures in place at the destination as a key factor, often overlooked, that can influence the outcome of tourism interventions on poverty and local development. Following the New Institutional Economics (NIE) literature, institutions can be defined as the rules of the game of a society, which are composed of formal rules, informal constraints (such as norms of behaviour), and the enforcement characteristics of those rules (North, 1995). Organisations, which are groups of individuals with a common purpose, are then the players in this game. In the case of tourism, the organisations, or the stakeholders as they are called in the tourism literature, include the variety of businesses in the tourism industry, related industries, tourists, local and national governments, and workers, among others. From this perspective, the factors that determine how tourism influences the local economy and poverty alleviation depend on who the stakeholders are and how they interact. If policy-makers want to boost tourism benefits to the poor, they need to recognise that tourism consists of a system of stakeholders relationships that allow the delivery of the tourism experience. The stakeholders relationships affect how the tourism economy and supply chains are structured, and how far linkages develop into the local economy (Ashley, 2006). Since much of our interest is in public policy with respect to the tourism sector and how this can be used to induce tourism development that is poverty-reducing, it is worth noting explicitly the role of one key set of stakeholders government entities. At the national, regional and local levels and through a variety of agencies, the government can
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play a critical role in the way in which the tourism sector develops, even beyond influencing the broader context noted in the previous section. National governments can create incentives for tourism investment, including tax and import-duty exemptions, import facilitation measures, subsidies and guarantees. Concerns have been raised that these incentives can facilitate leakages, especially when governments do not design complementary strategies to increase the negotiating power of local tourism firms, and do not cultivate a culture of local entrepreneurship so that local links can be established for the provision of tourism goods and services. Governments also invest in tourism-specific infrastructure, and in tourism marketing campaigns that can influence the way in which tourism develops. The manner in which the government takes these actions and how it engages stakeholders in the tourism sector can influence the pattern of tourism development. Local community power has been considered by some to be a corner-stone of equitable distribution of tourism returns (Aref et al., 2009). Ashley and Roe (1998) refer to community power as a range of situations from passive involvement to full participation. Tosun (2000) identifies operational, structural and cultural barriers to tourism community power in many developing countries. Without community control, it may be the case that residents will be unable to negotiate access to local tourism resources, since they lack a sense of ownership. This can potentially limit their ability to participate directly or indirectly in the sector. By identifying key stakeholders and making an effort to understand their interests, positions and bargaining power, it should be possible to reach a full explanation of why tourism linkages within the local economy are weak or strong. As stated by Ashley and Mitchell, a good understanding of stakeholders interactions is needed, both to act as a diagnosis (to determine what to do), and as a baseline (for measuring future impact) (2008:6). Since organisations tend to address the needs and interests of those groups with the greatest influence (Johnson and Scholes, 1999), a deliberate strategy to maximise the poors access to jobs and tourist markets may be needed if tourism benefits are to reach the less well-off groups in society. Before being able to catalyse change, policy-makers need to answer the following questions (Lewis, 2006): (i) who are the main stakeholders?; (ii) what are their goals?; (iii) how much power do they have to promote their interests? The first question remains an important challenge. Freeman (1984) defines a stakeholder as any actor (group or individual) who can affect, or is affected by, the achievement of an organisations purpose. In the tourism context, all the groups and individuals who are affected by a destinations development are stakeholders (Ritchie and Crouch, 2003). Therefore, the stakeholder concept refers to individuals or groups that have an interest or interact in a system. However, which actors should be considered as stakeholders is not always clear, because there is no single motivation in tourism planning and development, but as many as there are interests and expectations. Thus, deciding which players to include in the analysis and planning of a tourism destination is case-specific. In a pro-poor tourism strategy, it is important to reach a full understanding of who are the poor that need to be targeted, since poor may be defined under different parameters (Ashley, 2006): unskilled or semi-skilled labour?; young people, indigenous minorities or women?; less developed regions?; those living below the national poverty line?; or the poorer half, third, quarter of society? In relation to the second question, an understanding of stakeholders goals is needed to identify their motivations and analyse the coherence
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between the stakeholders preferences and the objectives pursued by a pro-poor tourism policy. Finally, the third question helps to identify critical junctures that may enhance or constrain the benefits of tourism for different stakeholder groups, and give more visibility to certain groups, to the detriment of others. Of course, getting a grasp of the institutional context in which tourism functions requires analysis. There are a variety of methods that may help gain an accurate and informed diagnosis about stakeholders relationships in the tourism sector. For instance, systematic analysis of stakeholders allows key stakeholder identification, mapping and description. The concept of stakeholder theory and analysis originated in organisational research and strategic management, and now is found in diverse disciplines. In this context, Mitchell et al. (1997) assert that stakeholder relevance is related to the tenure of three attributes: influence, legitimacy and determination. The possession or lack of these three attributes helps to define the stakeholder typology. The main benefits of stakeholder analysis is that better insight can be gained in terms of stakeholders significance and priorities, and of the main associated risks for the success of a deliberate pro-poor tourism strategy. Limitations of stakeholder analysis are primarily related to the subjective nature of the exercise and the constant need for updating. Alongside the concept of stakeholder analysis has evolved the network analysis technique, which has a long tradition in the social sciences field and refers to data collection and analysis procedures designed to study relations among specifically connected actors (Timur, 2010; Marsden, 1990; Baggio, 2008). The knots in the system are the people or organisations, while the ties represent the relationships. The basic unit of analysis is relationships (formal or informal), since they are usually more systematic and repetitive than individuals (Timur, 2010). Network analysis focuses on the pattern of relationships through measures such as range, density, centrality and clustering (Timur, 2010; Rowley, 1998; Burt, 1980; Scott, 2000; Krackhardt, 1992). Deciding which actors to include in the analysis has been among the key challenges of network analysis (Rowley, 1997). Scott et al. (2008) have reviewed the use of network analysis in tourism and found that the major approach is qualitative in nature, illustrating the relationships of pre-identified groups. In comparison, much network analysis outside tourism adopts quantitative methods, to identify and define a group. Value Chain Analysis (VCA) is another tool that allows the description of a range of functional activities, service providers and customers in the framework of supply chains. It has been applied in some pro-poor tourism strategies as a way to increase participation opportunities for the poor. In this context, the tourism chain is conceptualised as the system of stakeholders relationships that allows the delivery of the tourism product, and the unit of analysis is the whole tourism sector. The VCA analyses how the poor participate in the tourism chain, and how their positions can be enhanced (Ashley and Mitchell, 2008; Mitchell and Ashley, 2009). Whichever the approach, the critical issue is to understand the stakeholders involved, the extent of relationships, and the degree to which the poor are involved. Of course, involvement does not necessarily imply substantial benefits being accrued to the poor, so that would still need to be measured. The hypothesis that we wish to test, then, is that it is the institutional context that determines whether tourism development brings about poverty reduction. Of course, an implicit assumption in this view is that a richer institutional
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context defined as one with more concrete relationships and particularly one in which relationships are fostered to improve local interaction with the tourism economy is likely to enhance local benefits and the poverty-alleviating effects of the tourism economy. This is in contrast to an institutional context in which there are fewer stakeholders or weaker relationships. If this is the case, it implies that promoting a tourism sector without taking into consideration the stakeholders involved and the relationships within the sector is less likely to be successful than a tourism development strategy that carefully considers stakeholders and their relationships.

4.3 The type of tourism: products and market segments


Tourism can be distinguished by the characteristics both of the destination and of the tourists visiting that destination. Depending on the broader context and tourism assets and institutions, the destination may emphasise cultural tourism, sun and beach tourism, ecotourism or business tourism, among others. The type of tourist may be differentiated as well, including domestic or international, and high-end or low-end tourists (depending on the spending levels). Of course, the type of destination influences the type of tourists that visit, so these two factors may be closely related. As a general rule, international and high-end tourists may appear more desirable than domestic and low-end tourists since they potentially spend more and bring in foreign currency. However, they may stay in more exclusive hotels, eat at expensive restaurants, and generally participate in relatively high-priced activities. Providing services for this clientele may then involve more outsiders in the tourism industry which will potentially lead to fewer local benefits, especially for the poor. The risk is that tourists are kept in an enclave and economically separated from locals. Alternatively, domestic and low-end tourists may not spend as much, but may be more likely to stay and eat at locally-owned establishments and participate in activities that involve more locals, thereby providing greater benefits. It may be that relatively poor backpackers provide greater local benefits if they are willing to stay with local communities (Hampton, 1998). Of course, the type of destination these tourists visit may matter. Sun and beach tourism brings tourists to a destination, but may keep them largely isolated from the local economy, while, on the other hand, cultural tourism may draw tourists into towns and communities where they spend their money. The benefits of tourism are likely to depend on how the characteristics of the destination and the tourists influence the direct and secondary effects of tourism expenditures. While this hypothesis seems to have shaped tourism policy in some developing countries over the last decades, it has not been corroborated by empirical evidence. For instance, Mitchell and Ashley (2010) have recently compiled different examples that question the hypothesis that the type of tourism affects the strength of local linkages. They show evidence that reveals both strong and weak linkages in the case of cultural tourism (Laos and Cambodia respectively), of business tourism (Vietnam and Ethiopia), and of package beach tourism (the Gambia and Tunisia). This challenges the assumption that certain types of tourism necessarily produce weak local linkages. Furthermore, Dwyer (2005) points out that the volume of tourist expenditure is not directly proportional to its local economic impacts, since these also depend on the type of goods and services purchased, not just the quantity. In many cases, the spending pattern of
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domestic tourism may be more closely linked to locally-produced goods and services, and may be a better tool to foster backward economic linkages than a higher-spending international tourist who is more dependent on imports. It is not always the highestspending tourist segment that generates the highest benefit. This conclusion defies some of the tourism development strategies that target up-market tourists without any prior assessment of their spending patterns. This initial evidence suggests that there is no single answer to what type of tourism or market segment should be prioritised, since any type can have strong or weak local linkages depending in each case on the behaviour of tourists, but also of private companies, local communities (including the poor) and government (Ashley, 2006). Therefore, further empirical evidence is required to draw firm conclusions to test the hypothesis that it is the type of tourism that matters most in establishing local linkages and creating the povertyreducing benefits of tourism.

4.4 Moving forward


Testing the hypotheses that the three general factors highlighted in this section play critical roles in the tourism-poverty link would necessarily involve a series of studies. The only way to establish empirically the extent of the tourism-poverty link in varying circumstances would be through multiple quantitative studies across a range of tourism situations. While this can be done by analysing a variety of tourism sites in developing countries, we argue in the next section that one clear way forward is to use tourism investment projects, particularly those funded by multilateral development banks, to test these hypotheses.

Tourism projects: informed diagnosis and impact evaluation

A number of research methods have been highlighted in the previous sections that can provide useful insights into the tourism-poverty link. In some cases, these approaches have been employed to provide such insights. However, there are two potential arguments for not relying solely on the aforementioned approaches. First, a key motivation for analysing tourism-poverty links is to provide insights into what policies and projects could be used to promote such linkages. One way to do this is to look directly at existing policies and programmes to see if they have successfully achieved this objective. Second, unpacking the kinds of factors that influence the tourism-poverty link requires robust analytical approaches that seek to identify empirically the link between poverty alleviation and tourism promotion. The use of robust analytical techniques is facilitated by examining situations where the tourism context is changing, such as when a new tourism policy or project is put in place. For this reason, we now argue that what is needed is to incorporate accurate diagnosis and evaluation into tourism projects, using the approaches and concepts of the literature on impact evaluation.

5.1 Impact evaluation


Interventions undertaken by the public sector through development projects provide an opportunity to examine whether particular approaches to development are effective in
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achieving objectives. This is because the projects induce some form of change in conditions that can be assessed. For this reason, in the past decade there has been a dramatic increase in the evaluation of development projects using quantitative impact-evaluation techniques. This expansion is part of a broader trend of evidence-based policy-making that seeks to ensure that public policy brings about the intended results (Gertler et al., 2011). Impact evaluation is one component of an overall strategy to assess a projects development effectiveness; it seeks to establish a causal relationship between a project and the desired outcomes of that project by using counterfactual analysis. When well designed, impact evaluations can help not only to determine if a project has met its objectives, but to provide lessons on which project investments tend to work and which do not. Furthermore, by conducting impact evaluations across a range of projects, it is also possible to determine which approaches are most successful at achieving specific objectives, such as greater income gains for poor households. Evaluating interventions is therefore useful in providing insight into the process of development as well as into the best approaches for addressing development problems. While evaluating tourism projects is challenging, the concepts from this literature are extremely valuable. For this and a number of reasons noted below, understanding the tourism-poverty link is likely to be more successful if done as part of development projects. To show how this may work, we first examine tourism projects in developing countries and then consider how these can be evaluated to gain valuable insights into the role of tourism in poverty alleviation.

5.2 Public investment in tourism with particular reference to the IDB


Public investment in tourism as a mechanism for promoting development has a long history. The basic rationale for such investment is twofold. First, the benefits of tourism in terms of driving economic growth, generating employment and earning foreign exchange are unlikely to be realised at a socially optimal level if investment is left solely to the private sector. There are a number of reasons why this is the case. As with other industrial clusters, location matters since the geographic concentration of tourism activities assists in making those activities competitive. In general, clusters promote competition through: (i) increasing the productivity of firms by means of better access to specialised inputs and employees, information, customers, marketing channels and institutions, and public goods; (ii) a greater ability to innovate through better contact with suppliers and customers; and (iii) lower barriers to entry due to better information and opportunities in existing clusters (Porter, 1998). The investment in one tourism activity can have positive externalities for other activities, and these benefits are not captured by the individual investor. To ensure optimal investment, the government may need to provide support to the development of the destination. Some of this support may need to come in the form of public goods, such as roads and water and sanitation, which generally require government support. Tourism, if based on natural resources, may also have positive (or negative) externalities for the environment, which may also justify government intervention. Ultimately, one motivation for public investment is to address different forms of market failures. The second motivation for tourism investment is to help meet a compelling social objective. One key objective is poverty alleviation through enhanced employment for poor households. This can be used to justify public-sector investment in particular regions within
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a country where poverty is concentrated. It may also be used to justify public investment in certain types of tourism activities that are identified as being more closely linked to poverty alleviation. Of course, tourism can also be promoted as a general strategy to generate employment and income for the population as a whole. In some cases, it may also be used as a means to maintain or preserve cultural heritage or natural resources deemed valuable by the public. To get a more practical sense of the types of public investments used to support tourism, the following discussion provides an overview of the experience of tourism investment in the last few decades financed through development projects. The focus is on the particular approaches and specific projects the Inter-American Development Bank (IDB) has supported, since this is the experience we know best, but the IDB approach generally tends to reflect the broader trends in the rationale for public investment and donor agency in the sector (Hawkins and Mann, 2007). Three major phases in the motivation for the IDBs support of tourism projects can be discerned. The first phase took place during the 1970s and 80s, when the IDB supported public investment projects focused on expanding the economic contribution of tourism, particularly in obtaining foreign exchange. The projects aimed at attracting international tourism by providing infrastructure, water and sanitation supply, access to and better management of sites of cultural and natural interest and financing schemes for privatesector development. These first interventions were of paramount importance in demonstrating the viability of the tourism sector in Latin American and Caribbean (LAC) countries, and gave rise to now consolidated destinations, such as Cancun in Mexico. In the second phase, during the 1990s, tourism began to play an overall greater role in the growth strategies formulated in the LAC countries, because of its perceived resilience to economic fluctuations and its capacity to generate jobs, income and foreign exchange, stimulate private investment and produce government revenue. Along these lines, Brazil saw in tourism a unique opportunity to develop its economically lagging Northeast region, and requested the IDBs support for two consecutive projects in the Tourism Development Program (PRODETUR). The first of these, initiated in 1994 for a total of US$ 1.1 billion, upgraded and expanded eight international airports, built or rehabilitated 877 km of highways and access roads, provided access to drinking water and sewerage services to 1.1 million people, undertook conservation work on 22 cultural heritage sites, and implemented efforts to 2 conserve protected areas. Although, according to the evaluation of the programme carried out by the Tribunal de Contas da Unio (2004), this project was successful in stimulating economic growth, it did not, however, promote policies sufficiently to prevent or mitigate the negative social and environmental impacts of rapid growth. The PRODETUR experience led to an explicit recognition that tourism is a multisectoral and multidimensional process. As a consequence, during the third phase, the IDB made a distinct effort to broaden the planning, policy-making and local ownership of the tourism development supported by its loans. The concept of tourism development was directly linked to the concept of sustainable development, calling for the expansion of tourism to be kept within acceptable environmental and social parameters. Supported projects emphasised
2. For a detailed report of these programmes see: http://www.bnb.gov.br/content/aplicacao/PRODETUR/ Apresentacao/gerados/apresentacao.asp
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community involvement, environmental conservation and greater inclusion as pillars of achieving sustainable development. With this renewed approach, the IDB approved PRODETUR II for Brazil in 2002, with a mandate to address the environmental legacies of previous investments, before expanding into other areas, improving the quality of life for the population living permanently in the selected destinations, and putting mechanisms in place to guarantee responsible tourism.3 While investments in public infrastructure remained an important component of these new programmes, during this phase the emphasis shifted towards achieving socio-economic objectives. In this current phase and in alignment with other donors (Hawkins and Mann, 2007), there is a renewed and expanding international interest in the role of tourism to help meet the United Nations Millennium Development Goals. With this mandate in mind and the recognition that specific interventions are necessary to ensure that the benefits from tourism reach those who need them most, the key development outcome that is driving the IDBs current support for projects is the distributional impact of tourist expenditure. The IDB is actively exploring and combining a number of approaches that will shed some light on the 4 differential impact that may be attained per tourist dollar spent. Although the focus on projects has become increasingly sophisticated in an attempt to respond to the complex nature of tourism, and each of the three reviewed phases has improved the working assumptions on which the tourism programmes have been designed and executed, the IDB (and other multilateral agencies) still face a series of challenges that must be satisfactorily addressed. The paucity of information available to date has inhibited the development of stylised facts on the impact of tourism in developing countries, and projects are designed, implemented and evaluated on a case-by-case basis. This approach produces micro studies based on empirical data, but their external validity limits generalising these results to a level that could be useful for policy prescriptions that are pro-poor. A more robust, systematic analysis is needed, to provide insight into interventions that can optimise tourism outcomes for the local economy and the poor in developing regions.

5.3 Tourism projects and impact evaluation


As can be seen from the previous section, tourism projects provide investments to achieve some set of development objectives, which, as noted above, have evolved over time. To achieve those objectives requires an informed diagnosis being conducted to identify priority investments to help promote the sector. These investments have, explicitly or implicitly, an internal logic in that they assume that, through the designated investments, tourism will in some way be enhanced and through that enhancement certain social objectives will be achieved. In effect, this diagnosis and the subsequent investment strategy generate a hypothesis, or set of hypotheses, about how tourism can be expanded to generate social benefits. Evaluating that investment is then a test of the validity of the hypotheses. By looking at the diversity of tourism situations within and across projects and by examining different approaches to promote tourism, multiple hypotheses can be tested. This will then shed light on the relationship between tourism development and poverty alleviation.

3. See PRODETUR II loan proposal at http://www.iadb.org/en/projects/search-project-documents,1302.html 4. See IDB (2011: Chapter XI).
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The standard challenge of any evaluation of the impact of a development project is determining the counterfactual that is, what would have happened in the absence of the project. To truly understand the impact of a project on a given indicator of interest, information would ideally be available on project beneficiaries with the project and those same beneficiaries without the project. The indicator could then be compared between these two situations to see if the project had made an impact. Of course, beneficiaries cannot be simultaneously in and out of the project, thus making it necessary to find a substitute to act as the counterfactual. To be legitimate, the counterfactual, or control group, would need to resemble the project beneficiaries, or treatment group, except that they would not have experienced the project. Thus, any differences in the indicator could be attributed to the project. From an impact-evaluation standpoint, evaluating the impact of tourism projects on poverty presents two significant challenges. The first challenge relates to attribution. As noted above, the key to any impact evaluation is to identify a reasonable counterfactual that can represent beneficiaries in the absence of the project. The problem with evaluating tourism projects is the highly non-random placement of tourism destinations they are sited on the basis of unique characteristics related to their tourism potential. Other regions are thus, by definition, different from the tourist region, making it difficult to find an 5 adequate counterfactual. An additional issue relates to the widespread secondary effects of tourism projects. Even if a tourism region similar to the target region can be found, it may be indirectly affected by the project, which makes it a poor counterfactual. The second challenge relates to the measurement of the secondary effects of tourism projects, which, as noted in Section 2, can be as large as the direct effects. In terms of impacts on poverty, the secondary benefits may be greater than the direct poverty effects if, for example, the sector mostly hires skilled workers. Capturing these secondary effects becomes crucial. However, measuring these effects is complicated by the fact that tourism not only transmits income into the economy through multiple pathways and a variety of sectors, but may also have effects on prices and wages which need to be taken into consideration in evaluating the impact of tourism projects. The strategy we propose to evaluate tourism projects and fill the knowledge gaps related to the role of tourism in development and poverty reduction, includes two primary components: (i) improved data collection on tourism and tourism receipts, and (ii) better modelling and assessment of secondary effects. With respect to data collection, this should include not just the collection of data on tourist arrivals, but also a range of information about their activities and spending patterns. Total receipts are insufficient and understanding secondary effects requires information on the details of spending. This information is most useful if collected in a comparable manner across regions within countries and across countries so that there is a harmonisation of tourism statistics. By

5. Secondary effects are generally considered an important issue in impact evaluation for two reasons. First, because they can potentially contaminate the control group. That is, the control group may receive benefits from a programme indirectly and if this is not recognised the benefits of the programme will be underestimated. The second reason is that these benefits should be measured, especially if they are an important portion of total benefits. See Angelucci and Di Maro (2010) for a discussion of secondary or spillover effects.
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means of a combination of these efforts, the strategy is to increase data-collection efforts so that a critical mass of data is available on tourism in developing countries. Eventually, these data can then be used to assess the impact of tourism projects by comparing regions in which intervention has occurred with those where no activities have been undertaken. The approach mirrors that taken by Chomitz and Wertz-Kanounnikoff (2005) who faced a similar problem in evaluating a programme to reduce deforestation in Brazil. In this case, the deforestation programme explicitly targets areas where deforestation is easily observed and is likely to be unauthorised. Comparisons with nearby forests that do not meet these criteria are not valid comparisons. The solution is to identify similar areas using geographic and socio-economic data to act as a counterfactual for the 6 effectiveness of these programmes. This is combined with a double-difference approach to determine if deforestation in the target areas declined, relative to other areas, after the programme was instituted. Similarly for tourism, if data on tourism receipts are available across a number of countries and regions, it is possible to determine if tourism trends in a region targeted by a development project are greater than the trends in similar, but nontargeted, tourism regions. The second component of the impact-evaluation strategy is the use of simulation models discussed in Section 3.1 detailed CGE models or economy-wide models to capture the secondary effects of tourism projects. These models provide an understanding of how the spending of tourism receipts is transmitted through the economy and the effect it has on prices, wages, economic sectors and households within the economy. If sufficiently disaggregated to include both a tourism sector and poorer socio-economic groups, it will be possible to trace how project-induced tourism receipts permeate through an economy. The two parts of the strategy then provide attribution of project impact on tourism receipts and the direct and secondary impacts of the changes in receipts on the economy. Of course, taking this approach requires substantial data collection, which provides another practical motivation for using tourism projects as a basis for understanding tourism receipts. Tourism projects in developing countries should make a special effort to include funding for improved tourism data collection as well as funding for systems of monitoring and evaluation. For most multilateral- and bilateral-financed development projects, this is not an option, because of increasing pressure to show development effectiveness. It provides a unique opportunity to expand the knowledge base on tourism and poverty.

5.4 Moving forward


For the reasons noted in this section, tourism projects and the evaluation of these projects have the potential to expand our understanding of the tourism-poverty link and test particular hypotheses about the conditions under which this link is most likely to be strongest. The approaches to evaluating these projects and simulating their effects on the economy are generally known and with adjustments can prove quite valuable. Of course, additional analyses such as those noted in Section 4.2 for examining stakeholder
6. The double difference refers to difference across time and difference across space. Thus it allows for comparisons of trends between a control and treatment group that are independent of initial differences. Provided the pre-intervention time trends in the treatment and control were, on average, similar prior to the intervention, this allows for an unbiased estimate of programme impact. See Gertler et al. (2011) for this and other approaches to evaluating the impact of development projects.
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relationships are of great importance and play a clear role in understanding tourism development and poverty alleviation. We have focused less on them here since they are already being used, while simulation models and impact evaluation have been less used for analysing the link between tourism and poverty. No single approach can provide all the answers, since all provide benefits and face limitations. The challenge is to systematically triangulate different methods to gain informed and accurate diagnosis, while developing empirically demonstrated propositions with applicability outside the specific context in which they have been derived.

Conclusion

Understanding the tourism-poverty link is critical if the tourism sector is to be used as a mechanism for reducing poverty and achieving the Millennium Development Goals. This article shows that not only is the conceptual foundation of the tourism-poverty link well understood, but appropriate methods for empirically analysing that link already exist. The problem is that these methods have not been adequately employed across a range of situations to provide sufficient insights into this link. In this article, we put forward a research agenda for using these methods, particularly within the context of tourism projects in developing countries, to expand our understanding of tourism-poverty links. The agenda includes three general components. First, the types of simulations already used by tourism researchers, such as CGE and economy-wide models, should continue to be employed, but should be modified as discussed in Section 3 to incorporate the impacts of tourism expansion on poverty. While this requires obtaining additional data and modifying in some cases the level at which an analysis is conducted, it is the best means for quantifying the extent of tourism-poverty links. If this type of analysis is carried out across a range of tourism circumstances, greater insights will be provided on these links. Second, to provide input for tourism policy-makers on how to direct policies and investments, it is insufficient to consider solely whether tourism development is linked to poverty reduction. Instead, a focus of the research should be directed to understanding the conditions under which the relationship between tourism and poverty is greatest. To do this requires researchers to carefully consider why the link may vary, and in this article we have highlighted three general factors that are likely to influence the link. Our personal view is that stakeholder relationships at tourist destinations play a critical role and that tourism projects should make a conscious effort to fully understand these relationships and intervene to influence them in a manner conducive to inducing local linkages and poverty reduction. This remains a hypothesis that needs to be empirically tested across a range of circumstances. Third, to establish a causal link between tourism and poverty reduction, researchers should work with governments, multilateral development banks, bilateral development agencies and non-governmental organisations and use the approaches from the impactevaluation literature to identify the impact of tourism projects on poverty. Not only does such an approach allow hypotheses embodied in tourism investments to be tested, but projects can also provide the necessary funding and data to conduct such an analysis. Through a strategic systematic analysis of a range of projects, insights into which public investments in tourism are most likely to bring about poverty reduction will be provided.
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first submitted March 2011 final revision accepted April 2012

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