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An Assessment of the Impact of Tourism in the Balearic Islands

According to the official Institute of Tourist Studies, the Balearic Islands, a Spanish region with just over one million inhabitants, received 9.6 million international arrivals in 2005 out of 55.8 million for the entire country. Although a rather impressive figure, it is 8.2% below the 10.5 million recorded in 1999, which might partially explain why the Balearic Islands has recorded the worst growth performance of all 17 autonomous Spanish regions since 2000. A look at the 1997 regional input–output table confirms the Balearic Islands as a service-oriented economy highly specialized in the production of services for tourists. The main purpose of this paper is to provide the first assessment of the impact of tourism in the Balearic Islands using input–output techniques and several alternative assumptions on endogeneity of final demand components. The paper also estimates, under the same assumptions, the effects on the economy of a 10% fall in tourist flows. Finally, the results are compared with those obtained with a social accounting matrix model.