A CGE Approach to Measuring the Sectoral Contribution to an Economy: An Application to Western Australian Agriculture

Typically, sectoral contribution to an economy is estimated by measures such as shares in gross domestic/regional product, employment and exports. According to these measures, agriculture's contribution declines as the economy grows. However, the indirect contribution of the sector is likely to rise due to the expansion of agriculture–based processing activities in the process of economic growth. Input–output multiplier analysis is often used to capture such flow–on contributions of the sector. This paper proposes to use a computable general equilibrium framework to estimate the direct as well as indirect contributions of agricultural growth in an economy. It also develops a methodology to distinguish the broader effects of agricultural output growth by source — input growth and productivity growth. The proposed methodologies are illustrated by applying these to analyze the contribution of agriculture to the economy of Western Australia, an agriculture and resources based state of Australia. The results for Western Australia suggest that the indirect benefits of agriculture exceed its direct contributions and that the contributions made by enhancing productivity in agriculture are indeed substantial. Importantly, the broader contribution of the agriculture sector depends critically on the specific source of the sectoral growth — input or productivity growth.     

An Applied General Equilibrium Model to Assess the Impact of National Tax Changes on a Regional Economy

This paper presents two versions of an applied general equilibrium model for the regional economy of Andalusia, Spain, that differ in the closure rule adopted to describe the behavior of the public sector. We use the model with to analyze the impact that the reform of the personal income tax (Act 40/98) implemented in Spain as a whole would have had on the Andalusian region in particular. The model is of the neoclassical variety and includes not only the productive sectors of the economy but also the foreign sector and the government, which are usually absent from theoretical general equilibrium models. Both versions of the model are calibrated by using a Social Accounting Matrix of Andalusia for 1995. The analysis shows that the reform is not self-financing, not even partially, despite governmental claims. It also indicates that there is a positive but smaller than anticipated economic stimulus. In welfare terms, we find that the category of Urban Salaried consumers is the one that benefits the most in real income terms.     

Agricultural Trade Liberalization in a Computable General Equilibrium Framework for the Philippines

A bi-regional and multi-market computable general equilibrium model that focuses on the agricultural sector of the Philippines' economy in 1987 is constructed. This paper presents the basic structure of the model and carries out some cost-benefit analyses to assess the impact of alternative trade reform policies on the economy. It is found that various liberalization policies can produce large benefits, but any single policy implemented separately may incur intolerable costs. However, a combination of trade liberalization and currency devaluation, coupled with target income support and income tax reform, can achieve balanced results that are beneficial to the economy without worsening income distribution and food consumption of the poor.     

THE TRANSPORT SECTOR AND REGIONAL PRICE DIFFERENTIALS: A SPATIAL CGE MODEL FOR CHINESE PROVINCES

With regression formulas replaced by equilibrium conditions, a spatial CGE (Computable General Equilibrium) model can substantially reduce data requirements. Detailed regional analyses are thus possible in countries where only limited regional statistics are available. Alhough regional price differentials play important roles in multiregional settings, transport does not receive much attention in existing models. This paper formulates a spatial CGE model that explicitly considers the transport sector and FOB/CIF prices. After describing the model, the performance of our model is evaluated by comparing the benchmark equilibrium for China with a survey-based interregional I-O table for 1987. The structure of Chinese economies is summarized using information obtained from the benchmark equilibrium computation. This includes regional and sectoral production distributions and price differentials. The equilibrium for 1997 facilitates discussion of changes in regional economic structures that China has experienced in the decade.     

Global Warming Policy and the Pennsylvania Economy: A Computable General Equilibrium Analysis

Most studies of the impacts of global warming policy have been performed at the national level. However, national averages obscure the fact that some regions may be affected much more than others. We formulated a regional computable general equilibrium model to analyze the impact of a carbon tax on the Pennsylvania economy. The model incorporates special features relating to labor mobility, trade and energy substitution for this purpose. Our results indicate significant negative overall impacts on the Pennsylvania economy, primarily because it is a major producer and user of fossil fuels, especially coal, and because it is highly industrialized. Sensitivity analyses on key parameters and model assumptions indicate that our results are robust.     

A synthesis of the production function and the shift-share model : A new regional modelling approach

The purpose of this paper is to suggest a new approach to regional modelling and show the way by which regional expansion paths of output and employment can be developed. Basically, the theoretical model is a synthesis of the production function for the industry (or region), the shift-share model, and a set of hypotheses and a number of identifies concerning the growth components of employment. The growth components of employment specified by the shift-share model and explained by the hypotheses enter and modify the production function in the sense that the shift-share model is linked directly to the production function in which the labor factor appears disaggregated into three distinct components (regional-share, industrial-mix, and national growth component). The theoretical model was tested for the manufacturing industry of the Greek economy. The policy implications of this model center around the fact that policy-makers can affect regional economic variables towards the desired level and direction.     

Two-level national-regional planning and mathematical programming decomposition applied to spatial price equilibrium models2

This paper is concerned with computation strategies related with the quantitative analysis of only a sector of a global economy (e.g. agriculture or energy). Under a ceteris paribus condition on the environment of the sector, and within the hypothetical context of the neoclassical economic theory, it is well known a type of partial equilibrium model that can be cast mathematically into an optimization framework. We attempt here to a typical specification which considers spatially separated markets, that has been called spatial price equilibrium model and that has contained within it many classical transportation problems (one for each commodity). The model is specially suitable for mathematical programming decomposition, resulting regional sybsystems whose coupling variables are the transportation flows. We explore here this structure, discussing two decomposition algorithms with economic interpretations that suggest decentralized procedures for planning. The first—of the price coordination type—is a variant of the Dantzig-Wolfe's principle which is expected to have a low number of cycles of information flow between the master level and the sub-problems (at each cycle it is calculated a series of regional production-consumption responses to alternative prices generated by transhipment problems at the central planning level). The second algorithm specializes the Geoffrion's projection/feasible directions technique, so interpreting the problem solution within the context of a net-output target coordination.     

Stability and efficiency from a Neo-Keynesian viewpoint

This paper raises once more the Keynesian challenge of the classical doctrine that an unguided market economy has a natural tendency towards optimal employment of resources. By means of a simple macromodel, we show that if quantity expectations are incorporated into the Walrasian model, then it is no longer generally true that the ‘invisible hand’ leads the economy to Walrasian equilibrium. Instead, it may lead the economy to a kind of Keynesian equilibrium in which the firms' sales expectations constitute a binding constraint on production. Moreover, while Pareto optimum is unstable and hence unattainable in our model, a ‘second-best’ optimum among stable equilibria exists and requires a public sector. Accordingly, a trade-off between efficiency and other policy aims occurs only at tax rates above the positive tax rate in optimum     

Potential impacts of the devaluation of Nepalese currency: A general equilibrium approach

This paper measures the potential impacts of the devaluation of domestic currency of the small, developing, landlocked and transition South Asian economy of Nepal, which is lagging behind in policy studies. The impacts on growth, distribution, price changes in factor and product markets, and on selected macroeconomic features are measured. Using a computable general equilibrium model applied to social accounting matrix data, we conclude that devaluation is expansionary but mostly benefits the rich, thus leading to a more uneven income distribution. In general, the expansion of economic activities occurs in agricultural and industrial sectors, whereas services activities contract. However, when the rate of devaluation is high, the agricultural sector also starts contracting. To this typical developing economy, devaluation causes an improvement in saving investment and export/import ratios, whereas the budget deficit widens.     

投入产出分析若干方法论问题的研究

一般均衡理论和模型存在难以求解和实际应用的基本问题，后人从不同思路对它进行简化，形成了旨在从理论上清楚说明市场机制作用的局部均衡理论和纯粹出于应用目的而建立的投入产出分析。投入产出分析是在简化价格调节的作用下，从生产技术的联系出发，并在同质性、直接消耗系数稳定性和比例性等假设下，沿着数量调节经济结构的路径，实现了一般均衡的可计量化和可观测检验性。我们认为，投入产出模型的前提条件——市场机制的完善以及整个生产力结构的均衡与我国生产力多元化结构的现实有相当距离。因此，如何根据我国基本国情正确认识和解决我国投入产出模型假设的问题是应当引起关注和重视的基础性方法论问题。     

THE ROLE OF SUPPLY CONSTRAINTS IN MULTIPLIER ANALYSIS

Multiplier analysis based upon the information contained in Leontief's inverse is undoubtedly part of the core of the input–output methodology and numerous applications and extensions have been developed that exploit its informational content, both at the national and regional levels. Nonetheless there are some implicit theoretical assumptions whose policy implications need to be assessed. This is the case for the ‘excess capacity’ assumption, which implies that resources are available as needed to adjust production to new equilibrium states. In an actual economy, however, new resources are often scarce and always costly. When supply constraints intervene, the assessment of the effects of government demand policies may be substantially different from that of the standard Leontief multiplier matrix. Using a closed general equilibrium model that incorporates supply constraints, we perform some simple numerical exercises and proceed to derive two ‘constrained’ multiplier matrices, based upon the implicit Jacobian matrix, that can be compared with the standard ‘unconstrained’ Leontief matrix.     

What are the main explanations of occupational diseases and accidents at work in the agricultural sector? A panel analysis for Italian regional data

The aim of this paper is to investigate the causes of occupational diseases and accidents at work (ODA) in the Italian agricultural sector. To this end, we proceed with a two-stage analysis of Italian regional data for the period 1976–2004. The first phase of the analysis shows that in the Italian agricultural sector productivity Granger-causes ODA, and not vice versa. The results of the econometric estimates in the second stage of the analysis show that an increase in “productivity pressure” (associated with an increase in production rhythms) will produce, in the long run, an increase in accidents on less serious ODA (or temporary ODA); the same effect will not be observed on the more serious ODA (or permanent ODA). We verify how pro work legislation reduces ODA and how this effect is strengthened in the long-run. In addition, we observe that in the long-run the increase in the “pressure on workers” (associated with a high unemployment rate and a high probability of being fired) is the main cause of the increase in less and more serious ODA.     

浅议怀化农产品物流发展的现状及对策

近年来,怀化农村经济快速发展,新农村建设顺利推进,有效促进了农民的增产和增收。但总体来看,城乡差距的局面没有根本改变。主要原因之一就是农产品流通不畅导致农产品不好卖,而目前怀化地区农产品物流发展滞后是影响农产品流通的关键因素。大力发展农产品现代物流是增加农民收入的重要途径,同时也是带动地区整体经济的强劲动力。     

Supply multipliers in a centrally planned economy with a private sector

A simple model of a centrally planned economy is developed with a state sector and private sector, and with a supply constraint affecting state sector output. In such a model, a supply multiplier can be derived under the same conditions which would make an increase in state sector prices an effective means of reducing shortage. Moreover, a one-sector constrained equilibrium model of the state sector does not yield misleading results by ignoring the private sector; and the private sector price level is a reliable indicator of shortage in the economy.This paper was written while I was a visitor at the European University Institute, Badia Fiesolana, Florence. I am grateful to Mario Nuti for participating in the discussions which stimulated the paper and to the Institute itself for the facilities provided.Comments from Geoff Wyatt enabled me to make some useful improvement to the paper.     

中国生产性服务业与现代工业关系实证研究

近年来,中国工业一直占据着第二产业近85%的比例,它在国民经济的高速增长中占有特别重要的地位。而工业增长中服务业,特别是生产性服务业的贡献越来越大。本文采用VEC模型对中国生产性服务业与现代工业之间的关系进行了研究。研究结果表明,无论是从长期均衡关系来看,还是从短期波动角度看,生产性服务业中交通运输、仓储和邮政、房地产、金融业产值增长对中国现代工业都有不同程度的影响。另外,中国现代工业变化既具有较大的短期波动惯性,又具有一定的基于长期均衡关系的反向调节能力。     

Economic consequences of intifada

In 2003 the World Bank (WB) and the International Monetary Fund (IMF) published estimates of macro-economic indicators for 2002 of the economy of Palestine. The WB used a micro-founded recursive dynamic computable general equilibrium (CGE) model, calibrated on the 1998 Social Accounting Matrix (SAM) of Palestine, to which shocks were applied, whereas the IMF based its estimates on a macro-founded income-expenditure model relying on more recent data. It turned out that there were substantial differences: the estimate by the WB of the real gross national income (at 1998 prices) was 25% less than the corresponding figure calculated by the IMF. This huge difference is not only relevant for a full understanding of the economic consequences of the intifada, but also for the size of the international community intervention. In this paper we propose our own evaluation with the help of a static CGE model, based on the 1998 SAM and the so-called intifada shock derived from data of the WB that we constructed for the analysis of some forms of emergency assistance in a previous article. It turns out that our estimates, based on an entirely different methodology, are remarkably close to those of the IMF.     

A supply-demand model of public sector size

We develop a supply-demand model for the public sector with a political equilibrium. The model considers the inefficiencies caused by taxes and includes costs associated with the provision of public goods to consumers. We show that the size of the public sector may depend on the median voter's income, population size, costs associated with paying tax, and quality of institutions, all of which reflect the costs of provisioning public goods. The estimates for the Organisation for Economic Co-operation and Development member countries are compatible with theoretical predictions; however, they do not confirm Wagner's law, which holds that the public sector share does not grow with an increase in income. A greater dependency ratio and the Gini coefficient increase demand for redistribution policies. Greater government effectiveness is a supply-side factor that increases the public sector's share in an economy.     

Input–output interactions and optimal monetary policy

This paper deals with the implications of factor demand linkages for monetary policy design in a two-sector dynamic general equilibrium model. Part of the output of each sector serves as a production input in both sectors, in accordance with a realistic input–output structure. Strategic complementarities induced by factor demand linkages significantly alter the transmission of shocks and amplify the loss of social welfare under optimal monetary policy, compared to what is observed in standard two-sector models. The distinction between value added and gross output that naturally arises in this context is of key importance to explore the welfare properties of the model economy. A flexible inflation targeting regime is close to optimal only if the central bank balances inflation and value added variability. Otherwise, targeting gross output variability entails a substantial increase in the loss of welfare.     

Divergent regional development, factor mobility, and nontraded goods

Using an endogenous growth model with learning-by-doing effects in the production of a traded good, we derive divergent regional-growth paths in a two-region-three-good setting. A nontraded-goods sector using a mobile as well as an immobile factor of production provides the possibility of a steady-state equilibrium with a dispersed distribution of mobile workers. The paper investigates regional specialization, trade, and migration patterns in the steady-state equilibrium as well as in the transition process towards the steady-state. The long-run production and trade patterns of the regions are determined by history-dependent processes.     

DEVELOPMENT OF REGIONAL SOCIAL ACCOUNTING MATRICES WITH DETAILED AGRICULTURAL LAND RENT DATA AND IMPROVED VALUE-ADDED COMPONENTS FOR THE USA

We describe a method for creating social accounting matrices (SAMs) with detailed agricultural land rent data for any arbitrary subset of the 48 contiguous states in the USA. Data on land use and land rents from various public sources is merged with national accounts data. The method reorganizes the rental income of persons concept present in national accounts to payments to conventional primary factors of production. This method also reallocates portions of the indirect business tax account to the appropriate sales and import tax accounts. SAMs created using this method should be useful inputs into input–output or computable general equilibrium models explicitly representing a heterogeneous land market and analyzing the economic effects of agricultural, bioenergy, water and climate policies on land-use change, land rents, agricultural commodity markets, trade and households’ welfare. The method's implementation is freely available, enabling others to rapidly create SAMs with their own desired region and sector aggregations.