A comparative static analysis of carbon tax policy and a “Smart City-JB”, Johor Bahru, Malaysia

Purpose- The purpose of this study is to develop a first fully functional Turkish Financial Computable General Equilibrium (FCGE) model that analyzes the economic impacts of infrastructure investment projects under different financing options. We examine three alterantive financing methods, i.e., public financing with tax revenues and government bonds, public financing with region specific tax policy and private financing. Methodology- The study employs Financial Computable General Equilibrium (FCGE) model. The FCGE model integrates the real economy with the financial one, and traces the flows of financial and real resources among economic agents at the same time. Computable General Equilibrium (CGE) models typically are comparative static equilibrium models of interregional trade and location based in microeconomics, using utility and production functions with substitution between inputs. The transport system enters the spatial economy through the costs of transport services. Transport sub models are applied to feed CGE models with cost changes in the transport sector as a result of policy measures. Our model is composed of a multi-regional financial CGE model and a transport network model. Turkish Multi Regional Computable General Equilibrium model constitutes of 11 regions. The model includes ten producers, one regional household, one national (or central) government and the rest of the world. Findings- The model is designed to analyze the economic effects of fiscal policies such as the transportation investment expenditures and alternative financing approaches on economic growth and welfare. It is possible to estimate growth and distributional effects of each project based on the financing method once the information on the investment expenditures, the construction location and the changes in the accessibility generated by the project are injected into the FCGE model. As a first attempt, we builded a Financial Social Accounting Matrix (SAM) for Turkey that FCGE models need, containing the details of financial institutions and transaction of agents’ assets and liabilities. The model specifies the behaviours of ten different sectors, one household, a central government, and the rest of the world. The model is designed to analyze the impacts of highway development with different financing strategies. We examine three alterantive financing methods: it can (a) public financing with tax revenues and government bonds, (b) public financing with region specific tax policy or (c) private financing. Conclusion- The main contribution of this research is to develop a first fully functional FCGE model to analyze the economic impacts of the infrastructure investment projects and their financing options on growth and welfare in Turkish economy. We develop a first fully functional Turkish Financial Computable General Equilibrium (FCGE) model that analyzes the economic impacts of infrastructure investment projects under different financing options. There are a number of ways to finance highway infrastructure investment: fuel taxes, user fees, trust funds etc. This Financial CGE model is expected to assess the consistency of highway investment programs under different financing options, so the government can make a decision on an approval for the project based according to their benefits and costs on national level.

The Johor Bahru metropolitan area is an industrial and commercial hotspot in the region and almost any significant industrial brand has a branch here. However, the effectiveness of good and effective industrial policy has never been quantified to integrate economy and environment. Taking into account the idea ‘think globally, act locally’, with an emphasis on economy, environment integration, and introducing a Low Carbon City, by building a computable general equilibrium (CGE) model, this study successfully examined the economic impacts of new production and the usefulness of economic measure based on the simulated macroeconomic and sectoral factors. An input-output (I-O) table and social accounting matrix (SAM) is the cornerstone in designing a CGE model. Lack of input-output table has badly hampered any effects in the arena of CGE modelling in Johor Bahru City. This study, therefore, attempted to utilize the most updated 2005 input-output table of Malaysia to prepare an input-output table of Johor Bahru City along with using several statistics, including the national population census, manufacturing census and commerce census for developing an input-output table for economic analysis. Modelling results showed that the total industrial output including city GDP has increased 0.07% and 0.08% respectively in 2005. Additionally, the decreasing trends of the prices of major commodity products such as solar power( -1.53 %), electric vehicle ( -0.77%) and in cogeneration (-0.32 % ) were observed significant. Thus, new industrial formation and subsidy plan have proven as the most significant contributors. Therefore, the present research suggests to apply this model into Johor Bahru City’s economy to integrate economy and environment in a city named ‘Low Carbon City-JB’.

The three papers are different yet have a common theme, the application of computable general equilibrium (CGE) modeling in agricultural policy analysis. Adelman and Robinson present a social accounting matrix (SAM) for the United States, emphasizing the agricultural sector. Derpanopoulos provides an optimal control formulation for CGE-like models. And lessons from experiences in applied CGE modeling are reviewed by Clarete and Roumasset. It is interesting and telling that the papers, although advocating the CGE approach, are about models only partially incorporating the associated concepts (Scarf). After some general comments on CGE modeling, brief observations are made on the three papers. Applications of CGE models in policy research raise a number of important questions on specification, estimation, solution approaches, and the selection of appropriate policy exercises. CGE models are static and have high prior information content. The separability and other assumptions on preferences and technology required to limit parameters and facilitate solutions are most plausible for more aggregate models. These aggregated specifications limit importantly the policy exercises that can be successfully undertaken with CGE models. Extensions to include dynamics in CGE-like structures are at present ad hoc and inconsistent with the CGE approach. There is interest presently in econometrically estimating CGE models (see Scarf and Shoven collection). But CGE models have high prior relative to empirical information content. If the empirical information content of the models is limited, then calibration and other estimation schemes that may not take best advantage of the data can be justified. Careful econometric estimation is most important for models with high empirical content. Since these models have high prior content, refinements in the way empirical information is introduced may have little impact on model outcomes. Arguments for calibration are better justified on this basis. Presently, it is possible to solve CGE models using readily available nonlinear programming algorithms. In fact, the dimensions of models solvable with the available technology are probably larger than can be justified, given the behavioral and technical underpinnings. Of course, currently available solution algorithms can be improved and extended to other general equilibrium models (Derpanopoulos). However, it is important to separate these extensions from the now-standard

This thesis investigates the effects of trade on the labour market in Malaysia. Specifically, we study the impact of a tariff cut in the motor vehicle industry on the different occupational wages and employment. Tariffs played an important role in Malaysia’s economic development; from an import-competing economy to an export-oriented economy. The literature on trade, wages and employment for Malaysia is limited because of inadequate occupational data to carry out econometric analysis. To fill this gap, we use a dynamic computable general equilibrium (CGE) model for the Malaysian labour market, MyAGE_LM to analyze the effects of a reduction in motor vehicle tariffs. CGE models have theoretical rigour and extensive analytical capabilities for carrying out policy analysis. This thesis contributes to the literature by (i) Introducing labour supply with nine different occupational groups into the dynamic CGE model for Malaysia and (ii) Analyzing a reduction in the motor vehicle tariff rate in Malaysia. The policy simulation is a 5 per cent cut in the motor vehicle tariff rate. To facilitate the analysis of the tariff cut, the MyAGE_LM model incorporates the labour market mechanism similar to that of Dixon and Rimmer (2003; 2008). The simulation results for the impact of the tariff cut on macroeconomic indicators, sectoral outputs and nine categories of occupational wages and employment are presented. The results are analyzed in terms of major model mechanisms. The macroeconomic results of the tariff cut indicate that in the short run, with the government aiming for revenue neutrality through increased labour taxes, there would be a small welfare gain. We also found that in the short run, exports fell despite real devaluation. So, the export sectors do not benefit in the short run. In the long run, aggregate real wages increase, and there is an economy-wide gain in GDP and aggregate consumption. The sectoral results revealed that most export-oriented industries would experience an increase in output. There are some evident effects on occupational wages and employment. The occupational group that stands out is the semi-skilled occupational group, SklAgriFish. This occupational group experienced the biggest decrease in vacancies. SklAgriFish occupations do well because no workers in this occupation are employed in the motor vehicle industry. Also, a significant proportion of SklAgriFish workers are hired in the export-oriented Agriculture industry, and the Agriculture industry sells to FoodBevTob (which does well in the long run because of real devaluation). The PlantMachOpr occupation does relatively well because a high proportion of these workers is employed in OthMachEquip industry (export-oriented and a winner from tariff cut in the long run). In general, from the MyAGE_LM policy simulation, we find that the tariff cut did not have a significant impact on the labour market. There are only small changes in average real wages and employment. We find damped labour supply effects in both the short and the long run. Semi-skilled occupations gain relative to skilled and unskilled workers. Skilled workers do not do well. They are mainly hired in non-traded industries that scarcely use imported motor vehicles

American Journal of Agricultural EconomicsVolume 68, Issue 5 p. 1219-1221 Invited Papers Session Optimal Control of General Equilibrium Models: Discussion Richard E. Howitt, Richard E. Howitt professor Department of Agricultural Economics, University of California, DavisSearch for more papers by this author Richard E. Howitt, Richard E. Howitt professor Department of Agricultural Economics, University of California, DavisSearch for more papers by this author First published: 01 December 1986 https://doi.org/10.2307/1241879AboutPDF ToolsRequest permissionExport citationAdd to favoritesTrack citation ShareShare Give accessShare full text accessShare full-text accessPlease review our Terms and Conditions of Use and check box below to share full-text version of article.I have read and accept the Wiley Online Library Terms and Conditions of UseShareable LinkUse the link below to share a full-text version of this article with your friends and colleagues. Learn more.Copy URL Share a linkShare onFacebookTwitterLinked InRedditWechat No abstract is available for this article. Volume68, Issue5December 1986Pages 1219-1221 RelatedInformation

Computable general equilibrium (CGE) modelling represents a powerful tool for hypothesising possible sustainability outcomes that might be triggered with the implementation of policy proposals. Nevertheless, CGE modelling is based on several tight general equilibrium and neoclassical micro-economic theoretical assumptions that make their application to the assessment of all three pillars of sustainability questionable. Although some of these assumptions have been relaxed in recent and more advanced CGE models, further research needs to be undertaken in order to bring model specifications closer to realistic behavioural relationships. CGE models also tend to focus on alternative equilibrium outcomes and rarely deal with the adjustment process or regulation measures needed to realistically bring the economy into the desired new equilibrium stance. Moreover, CGE models inherently face severe rigidities when attempting to deal with environmental and social effects. However, some authors have argued that CGE modelling may provide a suitable backbone for all three dimensions of Sustainability Impact Assessment (SIA). The paper takes a critical stand and supports the view that though CGE models may provide some useful information on individual, particularly economic, impact aspects of policy reforms, it may be inappropriate and even misleading to rely extensively on their use in SIAs.

ABSTRACTThis paper presents a review of Computable General Equilibrium (CGE) model applications for spatial economic and transport interaction modelling. This paper has three objectives (1) To deliver an up to date and comprehensive literature review on applications of CGE models in transportation, (2) To analyze the different methodological approaches and their theoretical and practical advantages and disadvantages, and (3) To ultimately provide guidance on designing CGE models for various transportation analyses. The content of the paper is as follows: first, a brief introduction to CGE models is provided. The history of CGE models is traced, ranging from their origins and seminal applications in economics, to their eventual adoption in transportation research. This is followed by a comprehensive review of the application of CGE models to transport projects and policies. Various applications in transportation are reviewed in terms of their intended application, as well as their treatment of space and time. Finally, these applications are contrasted with respect to their methodological approaches, with a close examination of various influential model choices. Here, the essential design choices made within these model applications are explained and debated, to clearly elaborate on the workings of the models and the design choices facing CGE model developers.

In the last 30 years, China’s rapid economic development has been accompanied by serious environmental pollution problems. In 2007, the overall waste management cost is estimated to have reached about 230.5 bil CNY and 0.87 % of China’s Gross Domestic Product (GDP). To reduce the heavy environmental burden andrealise the transformation of economic structure, the government proposed to pursue sustainable development in the 13th National Five-Year Plan (2015 - 2020). The objective of this paper is to evaluate the social-economic features of China’s waste management activities in different sustainable scenarios. Toachieve this goal, this paper established a Social Accounting Matrix (SAM) distinguishing the waste management sectors from open sources, and then constructed a country-level dynamic multi-sectoral Computable General Equilibrium (CGE) model. Using this model, this paper analysed the situation of China’s waste management sectors in three Shared Socio-Economic Pathways (SSPs) until 2030. The simulation results showed that in a high sustainable scenario, the waste management cost will rise to 323.7 bil CNY in 2030, and its weight of GDP will drop to 0.23 %. In a middle road scenario and a rocky road scenario, the GDP losses in 2030 are 355.8 bil CNY and 376.9 bil CNY with a weight of 0.27 % and 0.30 %.

Introducing detailed land-based mitigation measures into a computable general equilibrium model

This paper examines the development and implementation of computable general equilibrium (CGE) models and examines their application to economies undergoing transition. The generalised development of a CGE model is presented in terms of the series of 'building blocks' which comprise a typical CGE system, whilst the flexibility of the CGE approach is illustrated by comparison of two specific CGE models: the GEM-E3 framework, developed by a team of researchers, led by Professor Pantelis Capros, based at the National Technical University of Athens, and the Hungarian Multisectoral (HUMUS) model framework, developed by a team, led by the author, from the Budapest University of Economic Sciences. The paper then examines the issue of closure rules in CGE models, and details the manner in which closure rules may be chosen to reflect specific features of the economy under study, particularly when applying CGE analysis to economies under transition. Finally the paper analyses the implementation and simulation of CGE models, including the steps necessary to construct benchmark datasets, calibrate the models, and to estimate counterfactual solutions.

Aim/purpose – This study sought to assess the impact of an increased historical fixed VAT rate of 14% to the current rate of 15% on the South African economy. Design/methodology/approach – The method applied in this study was based on a Dynamic Computable General Equilibrium (CGE) model to evaluate the impact of both the VAT rate of 14% and a new rate of 15% on the South African economy. The CGE model has been proven over the years to be a suitable model when evaluating the impact assessment of any shock within an economy. Enhancements were made by the researcher to the direct and indirect tax section of the model, i.e., the direct tax section was disaggregated, such that for both firm and household revenues, a dividend income stream is separated from other income streams. The main reason is to facilitate a detailed analysis of Corporate Income Tax (CIT) and Personal Income Tax (PIT), as well as the latest implemented Dividend Tax (DT). Findings – When VAT was increased from 14% to 15%, the immediate reaction of the shock from the Dynamic CGE model indicates that the Gross Domestic Product (GDP) declined by 0.0002% in 2018, but increased by 0.0028% in the following year (2019). The trend continued until 2021, hence the 1% increase in the VAT tax rate will increase the expected forecast of VAT collection by approximately R3.2 billion on average. Research implications/limitations – The findings of this study will be implemented by the South African government, which will use a dynamic CGE model to assess South Africa’s VAT contribution to the economy. The database of the CGE model was limited to the Social Accounting Matrix (SAM) for 2015. Originality/value/contribution – The study recommends the use of this method for assessing the impact of tax policy changes to the South African economy. The CGE model seems to be the best model as far as the impact assessment of a shock in the econ- omy is concerned. This will assist the South African authorities with their decision mak- ing regarding future VAT revenue. Keywords: South African Revenue Service (SARS), Value Added tax (VAT), Dynamic computable general equilibrium (CGE) model. JEL Classification: H21, C68, E62.

This paper presents a simple approach to wrapping a computable general equilibrium (CGE) model around a behavioural microsimulation (BMS) model. The approach is akin to decomposing an integrated CGE model into a partial equilibrium (PE) or a BMS model and a ?residual? CGE model. This is likely to improve the BMS analysis when changes in labour supply are projected to be large. Specifically, this paper outlines how a household module with many households can be separated from the CGE model and how the resulting PE sub-model and CGE model can be solved iteratively, so that the equilibrium is identical to that obtained with an equivalent fully integrated model. The paper focuses on two challenges that arise when linking and solving the two models: how to find a convergent solution and how to ensure that it is a true general equilibrium solution. This involves ensuring that databases and theory in both models are consistent and fit exactly with each other. Some cases may require the use of a temporary slack variable to facilitate convergence. The approach has the potential to extend the range and quality of the analysis of policy-relevant issues.

With the emergence of regional computable general equilibrium (CGE) models in the later 1980s, there was significant optimism that they would greatly push economic policy and the empirical envelopes. Unlike partial equilibrium approaches or input–output methods, CGE models can trace the impact of an economic shock or policy shock through the various sectors, allowing estimates of changes in factors, output and prices. However, many of the first generation of CGE models had a ‘black box’ feel to them. Their results could be sensitive to the functional form, parameter estimates, and assumptions about capital and labour flows. For example, in their survey article, Partridge and Rickman (1998)11. Partridge, M. D. and Rickman, D. S. 1998. Regional computable general equilibrium modeling: a survey and critical appraisal. International Regional Science Review , 21: 205–250. [CrossRef], [Web of Science ®], [CSA] View all references called on CGE modellers to account for these problems and strive to produce more credible results. In recent years, regional CGE modellers have improved their approaches, producing innovative techniques to apply to real world problems.

Adelman, I., and S. Robinson. Application of General Equilibrium Models to Analyze U.S. Agriculture. Clarets, R.L., and J. A. Roumasset. Comparative Equilibrium Models and Development Policy Analysis: Problems, Pitfalls, and Challenges. Derpanopoulos, J. Optimal Control of General Equilibrium Models. The three papers listed above are different yet have a common theme: the application of computable general equilibrium (CGE) modeling in agricultural policy analysis. Adelman and Robinson emphasize the agricultural sector in a social accounting matrix (SAM) for the United States. Derpanopoulos provides an optimal control formulation for CGE-like models. It is interesting and telling that the papers, although advocating the CGE approach, are about models only partially incorporating the associated concepts (Scarf 1983). After some general comments on CGE modeling, brief observations are offered on the three papers.

Developing ‘travelthai’: a dynamic Computable general equilibrium model for tourism of Thailand and case applications on tourism setbacks and tourism-related fiscal policies