Technology Implication of Agricultural Sectors in China: A CGE Analysis Based on CHINAGEM Model

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

The aim of this study is to explore whether efforts to encourage producers to use agricultural machinery and equipment will significantly improve agricultural productivity, income distribution amongst social groups, as well as macroeconomic performance in Thailand. A 2000 Social Accounting Matrix (SAM) of Thailand was constructed as a data set, and then a 20 production-sector Computable General Equilibrium (CGE) model was developed for the Thai economy. The CGE model is employed to simulate the impact of capital-intensive farming on the Thai economy under two different scenarios: technological change and free trade. Four simulations were conducted. Simulation 1 increased the share parameter of capital in the agricultural sector by 5%. Simulation 2 shows a 5% increase in agricultural capital stock. A removal in import tariffs for agricultural machinery sector forms the basis for Simulation 3. The last simulation (Simulation 4) is the combination of the above three simulations. The results for each simulation are divided into four effects: input, output, income and macroeconomic effects. The results of the first two simulations produced opposite outcomes in terms of the four effects. Simulation 2 accelerated the capital intensification of all agricultural sectors, whereas Simulation 1 led to more capital intensity in some agricultural sectors. The effects of the input reallocation had a simultaneous impact on output in every sector. Simulation 1 led to a fall of almost all outputs in the agricultural sectors, whereas there was an increase in agricultural output in Simulation 2. In terms of domestic income effects, as a result of the decline of the average price of factors in Simulation 1, there was a decrease in factor incomes belonging to households and enterprises. Consequently, government revenue decreased by 0.7%. In contrast, Simulation 2 resulted in an increase in all incomes above. Finally, regarding macroeconomic variables, Simulation 1 had a negative impact on private consumption, government consumption, investment, imports and exports, resulting in Gross Domestic Product (GDP) decreasing by 0.8%. On the other hand, Simulation 2 had a positive impact on those same variables, affecting a 0.4% rise of GDP. The effects of Simulation 3 were very small in everything compared with the first two simulations. The effect of Simulation 4 was mostly dominated by Simulations 1 and 2; the negative results of Simulation 1 were compensated by the positive effects of Simulation 2.

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

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

Exchange rate is one of the major trade policy instruments used to correct current account deficit. This study used the standard computable general equilibrium (CGE) model developed by the International Food Policy Research Institute (IFPRI) to analyze the possible effects of exchange rate policy on the Sudanese economy. Sudan social accounting matrix (SAM) for year 2000 was used as a core database for the model. The results revealed that depreciation of exchange rate improved the GDP, due to improvement in the balance of trade, regardless of deterioration in total absorption level and agricultural exports benefits more from depreciation than the industrial sector. On the other hand, appreciation resulted in deterioration of gross domestic product (GDP) and improvement of private consumption. Finally, depreciation of the exchange rate had better implication on the economy as a whole and on the agricultural sector in particular, than appreciation of the exchange rate. Key words: Exchange rate, computable general equilibrium model, social accounting matrix.

This chapter summarized the current capabilities of computable general equilibrium (CGE) models that were designed to analyze and estimate the economic impacts of a terrorist attack. The CGE approach is a formidable one because it performs well in terms of nearly all of the modeling considerations applicable to the task and it superior to its major modeling competitors in most aspects. CGE is especially adept at modeling two major aspects of the economic losses in this context – resilience and general equilibrium effects. It should be noted that the formulation and application of most CGE models to date has been in respect of the economic impacts of disruptions to individual utility lifelines. Additional refinements are necessary to model the ramifications of more complex cases with widespread devastation of property from bombs or natural hazards. In should be emphasized that in these cases, the sum of the indirect damage stemming from simultaneous damage to several individual targets is greater than the actual damage because of redundancy, that is, one must avoid counting lost production in a factory from both its own destruction and its inability to produce. Most terrorist attacks however are likely to be relatively more targeted, in which cases further adjustments are not needed. Future research on CGE modeling of terrorism should focus on important aspects of the issue, as well as limitations of CGE modeling in addressing them. The combination includes improving the ability of CGE models to incorporate financial variables, technological change and cumulative adaptive behavior, short-term adjustments to equilibrium and long-term effects on economic growth.

PurposeThe purpose of this paper is to outline a version of SinoTERM, a multi‐regional computable general equilibrium (CGE) model of China that has been updated and disaggregated further to enhance the agricultural detail. A version of the model is publicly available and will be useful to CGE modelers studying Chinese agricultural issues (www.monash.edu.au/policy/sinoterm.htm).Design/methodology/approachThe paper outlines data sources for building SinoTERM. It contains a CGE application to agriculture in China. Unlike the national input‐output table published by the National Bureau of Statistics, the master database of SinoTERM contains many agricultural sectors.FindingsCGE models that represent a nation as a single economy may offer rich insights into winners and losers from particular policy scenarios. Multi‐regional analysis takes this a step further by comparing outcomes for regions in which particular industries are a relatively large part of the economy.Research limitations/implicationsThis paper builds on the first SinoTERM paper in several ways. First, the database is disaggregated further to represent tea, sugar cane and silkworms as individual sectors in the CGE database. Second, given the extraordinary economic growth in China, the national and regional database has been updated to 2006 using data from the 2007 yearbook. Third, the paper contains an application to agriculture: it examines the impacts of productivity growth in different agricultural sectors in China.Originality/valueThe regional CGE model used in this application could be used to explore many other policy issues concerning agriculture in China.

Market impacts of technological change in Canadian agriculture are measured within a computable general equilibrium framework using 2001 input-output data with agriculture disaggregated to six sectors and 13 commodities. Technological change is modeled as productivity rises in the use of intermediate inputs and of primary factors. Impacts on output, intermediate use of output, foreign trade, final consumption, returns to primary factors, and relative prices are calculated for primary agricultural commodities and processed food products. Impacts are summarized as three general outcomes. First, supply managed sectors adjust to technological change differently than other agricultural sectors. In the former, quota rents increase while in the latter, outputs, exports, and final consumption increase along with declines of relative supply prices. Second, large relative price declines for other commodities lead to consumer gains. Third, producer gains increase when the international competitiveness of agriculture increases. Finally, we compare the differential impact of technological change with and without supply management. L'impact que le changement technologique au sein de l’agriculture canadienne a sur le marche est evaluea l’aide d’un modele d’equilibre general calculable (EGC) qui utilise des donnees entrees-sorties de 2001 pour six secteurs agricoles et treize produits de base. Le changement technologique est modelise en termes de hausses de productivite dans l’utilisation d’intrants intermediaires et primaires. L'impact sur les extrants, l’utilisation intermediaire d’extrants, le commerce exterieur, la consommation finale, les rendements des intrants primaires et les prix relatifs sont calcules pour les principaux produits de base agricoles et produits alimentaires transformes. L'impact est classe en trois categories de resultats. Premierement, les secteurs soumis a la gestion de l’offre s’adaptent differemment des autres secteurs au changement technologique. Dans le premier cas, les rentes de contingentement augmentent tandis que dans le second, les extrants, les exportations et la consommation finale augmentent et les prix relatifs de l’offre diminuent. Deuxiemement, les chutes importantes du prix relatif d’autres produits de base entrainent des avantages pour le consommateur. Troisiemement, les gains du producteur augmentent lorsque la competitivite de l’agriculture sur la scene internationale augmente. Finalement, nous avons compare l’impact differentiel du changement technologique dans les secteurs soumis et non soumis a la gestion de l’offre.

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 production of public goods like amenity value of the landscape, food security, preservation of rural communities and rural lifestyle, by agricultural sector is a subject that has been widely accepted by experts. However, in many policies and political analyses carried out, solely the production of private goods by the agricultural sector is paid attention and the important function of public goods production is ignored. Given the importance of multifunctional debate of agriculture in policies analysis, this study examined the effect of agricultural multifunctionality in the simulation of the agricultural production subsidies reduction effects using Computable General Equilibrium (CGE) model. Simulation results of the effects of agricultural production subsidies reduction in terms of the multifunctionality showed that current practices to support the agricultural sector is non-optimal according to agricultural production and welfare reduction and the optimal level of supports with and without multifunctional agriculture is different. The simulation results showed that the welfare effects of economic reforms in Iran in the agricultural sector in terms of the multifunctionality will be positive. This is on condition that the welfare effects of agricultural reform in terms of the multifunctionality of agriculture are negative.

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.

In this chapter, we deconstruct the computable general equilibrium model and describe its core elements. These include sets, endogenous and exogenous variables, exogenous parameters, behavioral and identity equations, and model closure. We describe prices, price normalization, price transmission, and the numeraire. We explain how the CGE model runs and how to carry out an experiment. A computable general equilibrium (CGE) model is a system of mathematical equations that describes an economy as a whole and the interactions among its parts. A model this comprehensive is more complex than the bicycle industry model we built in Chapter 1, but it need not be a “black box.” In this chapter, our objective is to introduce, at a general level, the model's elements and mechanics. Even so, for many students, it may suffice to skim this chapter and return to it as needed as your modeling skills progress. For now, we also set aside any consideration of the economic theory that governs behavior in the model. Here, we do not consider how the model describes the motivations behind producers’ decisions about how much to produce or consumers’ decisions about how much to buy, or a nation's choice between consumption of its domestic production and imported goods. Of course, the economic properties of a CGE model are its real heart and soul, but they also present a much broader area of study; most of the other chapters in this book address this study. In this chapter, we deconstruct the CGE model to describe its core elements. We show that a CGE model and the simple bicycle model share many features, such as exogenous and endogenous variables, market-clearing constraints, and identity and behavioral equations. We explain and compare linearized and nonlinear expressions of the behavioural equations in a CGE model. We describe how the price of a single good changes as it moves along the supply chain from producers to consumers and the implications for price transmission. We explain the practice of normalizing prices and the role of the price numeraire. We introduce model closure, which is the decision about which variables are exogenous and which are endogenous. We also describe how the CGE model runs by explaining the sequence of model calibration or consistency check, baseline model solution, and model experiment.

Over the past three decades, computable general equilibrium (CGE) models have become an important tool for empirical economic analysis. CGE models offer a comprehensive way of modeling the overall impact of policy changes on an economy or a region by considering all production activities, factors, and institutions. Such models also include factors such as markets and macroeconomic components: investment and savings, balance of payments, and government budget. CGE models are applauded for being able to incorporate multiple economic linkages that often come handy in explaining trends and structural responses to changes in development policy. CGE analysis allows for the assessment of the impacts of exogenous shocks within a constrained optimization framework (Raihan, Infrastructure and growth and poverty in Bangladesh, 2012). At the core of the CGE model is a set of equations describing the behavior of various economic agents (such as firms and households) when faced with changes in relative prices. In an increasingly market-oriented economy, the variations in prices may be the most important sources of reallocation of resources among competing activities which then may alter the factorial income and hence personal income distribution. Changes in personal income distribution of household groups and consumer price indices may have different implications on the welfare and poverty situations of the distinct household groups. Against this backdrop, this paper employs the CGE model for the Bangladesh economy to explore the impacts of a set of policy and natural disaster shock scenarios. These include a rise in crop productivity, a rise in the demand for labor-intensive exports, a rise in the allocation for social protection to households, and a natural disaster shock. A Social Accounting Matrix (SAM) prepared for the year 2012 serves as the consistent and comprehensive database for the abovementioned exercises.

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

The growth of China's textile industry has been one of the dominant factors shaping world cotton and textile markets in recent years. Since China's accession to the World Trade Organization (WTO) in December 2001, China's textile and apparel (T&A) exports have grown by more than 40 percent and China's cotton consumption has grown by 34 percent. By the end of 2003, China had nearly doubled its share of world T&A exports in less than a decade, to about 21 percent. T&A exports from China and other developing countries are constrained by quotas originally implemented by developed countries under the Multifibre Arrangement (MFA). Under the Uruguay Round's Agreement on Textiles and Clothing (ATC), these quotas have been gradually phased-out since 1995, with complete removal scheduled for the end of 2004. This study incorporates alternatives of the impact of the ATC's implementation in an analysis of China's textile industry, and its impact in turn on China's cotton sector. The study finds that, assuming equilibrium levels of income and exchange rates, alternative ATC scenarios are expected to increase China's net apparel exports, textile production, cotton consumption, cotton production, and cotton imports. This study also finds that these results are somewhat sensitive to estimates of expected efficiency gains around the world.