An economic analysis of community-based tourism in Thailand

Abstract

This study constructs a panel data 2003 and 2007, a social accounting matrix (SAM) and a computable general equilibrium model (CGE) in 2007 to investigate the effect of tourism on household income, poverty reduction and income distribution at the village level in Thailand. It conducted a census of 116 households in a particular village. There are three focuses. First, it examines the determinants of participation in tourism sector. Second, it investigates the effect of participation in tourism activities on household income change and poverty exit. Third, it simulates the direct and indirect effects of tourism price increase on income generation and income distribution in the village. In the first focus, the determinants of participation in terms of working hours vary among economic sectors. Villagers operating homestay, accommodations for tourists, stay within 1 km from village center, got tourism income in 2003 and got an increase in household members during 2003 2007. Households attending core tourism, e.g. trekking guide and cultural show, also stay closer to the village center and got tourism income in 2003. Moreover, their heads of households get better education. The pools of human capital in households are also larger. For the participation in tourism-induced sector, e.g. souvenir production and coffee shop, education plays significant role in terms of education of the heads of households, average schooling years of household members and size of human capital in households. Households with an increasing number of members and older people are advantage in joining this sector. For other non-tourism sectors, education is also important for the participation in commercial sector. However, education is less important for households joining agricultural sector, agricultural labor service and non-agricultural labor service. Community-based tourism can reduce absolute poverty. However, it depends on types of tourism activities. Households participating intensely in tourism-induced sector can raise their income. The increasing income is enough to help them get out of poverty. The reasons are that the sector empowers elderly people to earn additional income. Its labor productivity is competitive to those of other sectors. The size of the sector is large enough. Households also spend enough time to work in the sector. Finally, before 2007, the income in this sector distributed quite equally to poor households. In the simulation under an assumption of fixed labor endowment, the income multipliers are around 5.34 to 6.63 in the tourism expansion phase. The multipliers range between 5.78 and 6.86 in a simulation under expandable labor endowment. The value-added multipliers are around 1.28 to 2.16 in both simulations. Community-based tourism is not pro-poor. The richest quintile gains the real income growth much higher than other quintiles. The poorest quintiles can gain positive real income growth only when tourism price is driven 40 percent higher than the level in 2007. The second poorest quintile gains the least and even faces the drop of the real consumption. Overall, community-based tourism plays a minor role in poverty reduction. Only tourism-induced sector which is led by souvenir production is effective in reducing poverty. Therefore, the government should promote tourism-induced activities in tourism villages and encourage poor households to participate in tourism-induced sector.