Abstract
This study examined the economy-wide effects of reallocating the biofuel subsidy to invest in transportation using a recursive dynamics computable general equilibrium model. The constructed model consists of 35 sectors, 42 commodities, and 3 institutions (household, government, and the rest of the world). Three scenarios were simulated. In the first scenario, the subsidy of gasohol and biodiesel is completely removed, whereas, in the second and third scenarios, half of the removed subsidy is reallocated to finance investment in road freight transportation and road public transportation. The simulation results show that reallocating the biofuel subsidy to invest in road public transportation can lead to the highest long-term economic growth and has the lowest impact on the consumer price index (CPI). All findings suggest that policymakers should maintain continuous investment in transportation and prioritize this investment policy over the fuel price distortion scheme.
Highlights
This study examined the economy-wide effects of reallocating the biofuel subsidy to invest in transportation using a recursive dynamics computable general equilibrium model
By integrating the goals and the constraints of both the transportation investment policy and the fuel price scheme, this study aimed to examine the impacts of removing the biofuel subsidy and reallocating it to finance the investment in road transportation
This study examined the economy-wide impacts of reallocating the biofuel subsidy to finance road transportation investment
Summary
This study examined the economy-wide effects of reallocating the biofuel subsidy to invest in transportation using a recursive dynamics computable general equilibrium model. The most recent Logistics Performance Index (LPI) of Thailand is 3.41, which ranks 32nd of 167 countries [4] and is still far from the values of OECD countries [5] To resolve this shortcoming, the national strategic plan for logistics development was formulated, aiming to enhance Thailand’s logistics performance and expand facilities to enable multimodal transportation [6,7]. The national strategic plan for logistics development was formulated, aiming to enhance Thailand’s logistics performance and expand facilities to enable multimodal transportation [6,7] This national policy concentrates on financing infrastructure investment [1,7] because transportation development can raise manufacturing productivity in the long run [2]. Publisher’s Note: MDPI stays neutral with regard to jurisdictional claims in published maps and institutional affiliations
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