Non-Market Goods - Cost-Benefit Analysis
Methodology  -  Lake State Examples - Other Examples         
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Methodology:

Smith, S. L. J. 1995. Impact and Evaluation Methods. In Tourism Analysis: A Handbook. Essex, Longman Group Limited. Second Edition: 273-302.

This chapter reviews various impact and evaluation methods available for analyzing tourism. This summary will focus on two particular methods: conversion studies and cost-benefit analysis. Conversion studies look to measure the effectiveness of tourism advertising by basically answering the question of how many tourists did a specific advertisement (or advertisement campaign) bring to the destination. Conversion studies rely exclusively on surveys of people who may have seen the advertisement. However, these studies are fraught with challenges and often conducted with shoddy, self-serving research techniques. Problems include: failure to consider full range of factors in traveling decision; small sample size; non-response bias; poor sample distribution; failure to include all advertising costs; over-reliance on expenditure recall by memory; and failure to inquire why someone is requesting information. A cost-benefit analysis is a hypothetical experiment which asks whether society will be better off after the implementation of the proposed project. Cost-benefit analysis is used in four different context to determine: whether a project is feasible; the appropriate size of a project; which of several competing projects is most appropriate; and setting the development schedule of a set of projects.

Curry, S. 1994. Cost-Benefit Analysis. Tourism Marketing and Management Handbook. Stephen F. Witt and Luiz Moutinho (ed.), New York, Prentice Hall Second Edition: 504-509.

This chapter describes the technique of cost-benefit analysis and its use in tourism research. Essentially cost-benefit analysis is a technique for assessing the viability of a new investments or expenditure programs. In a cost-benefit analysis the costs and benefits in every year of a project are calculated and the present discounted costs are evaluated against the present discounted benefits. An important consideration sis determining the scope of the cost-benefit analysis. Is it narrow in scope and being conducted for purely for the investors in the project or is much broader in scope, evaluated from the publics perspective, with consideration for indirect and environmental effects. The chapter includes a brief discussion of how to properly valuate the costs and benefits under different assumptions.

Lake States Examples:

Samples, K. C. and R. C. Bishop. 1981. The Lake Michigan Angler: A Wisconsin Profile. Madison, WI: University of Wisconsin Sea Grant Institute, Department of Agricultural Economics, Center for Resource Policy Studies, University of Wisconsin-Madison.

This report builds a profile of the Wisconsin Lake Michigan angler. Included in the report is a section on the economic impacts of the angler. In 1978, Lake Michigan anglers in Wisconsin spent a total of $16.4 million on their angling pursuit. Of that, $9.8 million was spent in Wisconsin coastal counties and $1.8 million in other Wisconsin counties. A cost-benefit analysis of government expenditures to angler consumer surplus, calculated by willingness to pay, is also calculated. The study concludes that there were $2.5 million in government expenditures on Lake Michigan angling in 1978, while anglers derived a consumer surplus of $7.2 million. This is a return on government investment of $2.8 to every one dollar invested.

Other Examples:

Fleischer, A. and D. Felsenstein. 2000. "Support for Rural Tourism: Does it Make a Difference?" Annals of Tourism Research 27(4):1007-1024.

This study uses cost-benefit analysis to analyze the financial support by public agencies of small-scale tourism businesses in rural areas of Israel. When compared to other small-business types, support for tourism businesses is more cost effective. While both tourism and other establishments yield favorable cost-benefit rations and net present values per job, those of the former are consistently higher. This position is further strengthened on welfare grounds, as income distribution impacts of the support program being analyses revealed a more pronounced effect among the tourism firms.

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