Reconciling cost-benefit and economic impact assessment for event tourism

Abstract

Governments frequently justify their expenditure on underwriting the commercial viability of tourism events in terms of the economic impacts that the events bring to their host region. However, the justification for public expenditure in general is more usually based upon cost-benefit analysis, founded on the principles of welfare economics. It concentrates on consumer and producer surplus measures, with a particular emphasis on consumer surplus. In many cases the focus of special events is not on local consumers, but on attracting consumers from outside the region. In this case, producer surplus is the more appropriate focus. It generally assumes that resources are used at their opportunity cost. In contrast, economic impact analysis involves estimating the full value associated with the use of either labour or capital. This paper demonstrates that there is a potential correspondence between the welfare economics paradigm of cost-benefit analysis and the growth-based paradigm of economic impact. That link is based on an underlying presumption that resources are unused or underused, and therefore income generation is a real benefit.