Computable General Equilibrium Approach Research Articles

The Efficiency Aspect of Taxation in Pakistan: A Computable General Equilibrium Approach

The Efficiency Aspect of Taxation in Pakistan: A Computable General Equilibrium Approach

Evaluating the impact of a 24-hour economy on Ghana's economic landscape: A computable general equilibrium approach

The National Democratic Congress (NDC), Ghana's leading opposition political party, has unveiled an ambitious ‘24-hour economy’ policy proposal ahead of the country's forthcoming general elections in 2024. The policy aims to revitalise the nation's economic landscape by fostering round-the-clock operations in key sectors. This paper employs a dynamic Computable General Equilibrium (CGE) model framework, underpinned by the 2015 Ghana Social Accounting Matrix (SAM) and the 2021 Ghana Population and Housing Census (PHC) data, to evaluate the potential impact of the policy on Ghana's economy.Results indicate that under the proposed ‘24-hour economy’ policy, Ghana's real GDP growth (not to be confused with GDP growth rate) in ten years would be 31.71 % higher than it would have been under a ‘business-as-usual’ scenario in the same timeframe. This indicates substantial augmentations in economic output within the Ghanaian economy under a ‘24-hour economy’ setting. Further, the policy would generate more than 3 million jobs within five years of its implementation, with manufacturing, agriculture, wholesale and retail trade, services, construction and transport sectors experiencing substantial employment gains.The policy's transformative effects are driven by its ability to stimulate capital investment and capital formation, boost productivity and increase household incomes.The paper concludes that the NDC's proposed ‘24-hour economy’ policy holds substantial potential for transformative economic growth in Ghana. However, there are potential challenges associated with the implementation of the policy, which then necessitates a holistic approach to policy formulation, focusing on inclusive growth and sustainable development strategies.

The Effect of a Carbon Tax on the Economy, Welfare and Emissions in Morocco: A Computable General Equilibrium Approach

The Effect of a Carbon Tax on the Economy, Welfare and Emissions in Morocco: A Computable General Equilibrium Approach

On the impacts of higher tobacco taxes in Argentina: a computable general equilibrium approach

ObjectivesWe analyse the employment effects of increasing tobacco taxation in Argentina by building a computable general equilibrium (CGE) model.MethodsIn line with recent changes in tobacco taxation in the country, the...

COVID-19 Pandemic and its Economic Impact on the Global Economy: A Computable General Equilibrium Approach

Introduction: The COVID-19 pandemic, caused by the novel coronavirus SARS-CoV- 2, has been a global health crisis since its emergence in late 2019, impacting all aspects of life worldwide. It has revealed vulnerabilities in healthcare systems while also inspiring scientific advancements and cooperation in developing vaccines, highlighting the importance of preparedness and equitable healthcare for future challenges. Method: This paper evaluates the economic impact of the COVID-19 pandemic on the global economy. The study employed the Global Trade Analysis Project model using GTAP database version 10A with 2014 as the base year. The database's 141 regions and 65 sectors are aggregated into 20 regions and 29 sectors. The model used involves a baseline and two policy scenarios. The baseline scenario projected the global economy to 2020 from 2014 using macroeconomic variables, such as real GDP, population, capital stock, and labor supply. Policy scenarios 1 and 2 accounted for the impact of the COVID-19 pandemic and fiscal stimulus package, respectively. Result: The impacts of the pandemic are measured in real GDP, welfare, export and import volumes, trade balance, and output by sector. Simulation results indicate that the real GDP for all regions declined. The impact of COVID-19 on the welfare of countries, including Korea, Japan, the US, Mexico, China, Italy, and Great Britain, varied. In all these countries, the pandemic highlighted existing inequalities and vulnerabilities, affecting countries disproportionately. Government interventions, such as stimulus packages, income support programs, and vaccination campaigns, have aimed to mitigate the impact and support the welfare of the population. The pandemic disrupted global supply chains and increased trade costs, thereby negatively impacting both import and export volumes. The output of some sectors, such as tourism-related sectors, was heavily affected. Conclusion: The COVID-19 pandemic has impacted real GDP, welfare, export and import volumes, trade balance, and output by sector. By examining the specific implications of the pandemic on each of these economic factors, policymakers and researchers can gain valuable insights into the challenges faced and potential avenues for recovery.

The Effect of Tax Shock on Savings Interest on the Total Portfolio: Financial Computable General Equilibrium (FCGE) Approach

The Effect of Tax Shock on Savings Interest on the Total Portfolio: Financial Computable General Equilibrium (FCGE) Approach

Integrated modeling for sustainable fisheries in Morocco: a dynamic computable general equilibrium approach

Integrated modeling for sustainable fisheries in Morocco: a dynamic computable general equilibrium approach

Investigating the Economic Impacts of Inter-Basin Water Transfer Projects with a Water- Embedded Multi - Regional Computable General Equilibrium Approach

Investigating the Economic Impacts of Inter-Basin Water Transfer Projects with a Water- Embedded Multi - Regional Computable General Equilibrium Approach

Assessing the compensation and reinvestment plans for fuel subsidy rationalization in Nigeria: A dynamic computable general equilibrium approach

Ending subsidies on fossil fuels is vital for tackling the climate crises and promoting a transition to cleaner energy systems. However, ensuring a successful subsidy reform requires a detailed understanding of its potential impacts and measures to ameliorate those impacts. This study employs a dynamic computable general equilibrium model to examine the impact of fuel subsidy rationalization in Nigeria and evaluate the proposed compensation and reinvestment plans of the government in minimizing welfare losses and reviving economic activities. We found that a complete, one-off removal of fuel subsidies results in severe economic headwinds and significant welfare losses. While the proposed compensation and reinvestment plans of the government brought positive welfare gains and undid many economic headwinds, it was not the optimal policy pathway in terms of resource allocation. Our result showed that a balanced allocation of resources between compensation and reinvestment that implements three-quarters of the total expenditure in 2024 and the remaining one-quarter in 2025 offered better outcomes. We recommend practical measures to implement the proposed plan to minimize fallouts and maximize economic, social, and environmental gains.

The Russia-Ukraine War and Its Impact on the Food Security of Korea, China, and Japan: A CGE Approach

Purpose - In 2021, Ukraine and Russia exported 12% and 17% of global wheat, being significant grain producers and exporters. However, Russia’s invasion of Ukraine greatly impacts Ukraine’s wheat production and trade. In this regard, this study examines the impact of Russia’s invasion of Ukraine on global food security using the computable general equilibrium approach.
 Design/Methodology/Approach - We utilized the global multi-sector standard GTAP model, specifically the GTAP Database Version 11, with a base year of 2017. For this research purpose, the original 160 regions and 65 sectors of the GTAP database were aggregated into 23 regions and 24 sectors. Due to the uncertain nature of the conflict duration between Russia and Ukraine, we designed three scenarios: Slight, Medium, and Severe. Each scenario represents varying degrees of wheat production, trade disruption, and an increase in wheat production by third producers for shocks.
 Findings - The study reveals several effects: real GDP decreases for Ukraine, Russia, Turkey, India, and Georgia, while countries like Egypt, Turkey, Azerbaijan, India, Korea, and Japan experience diminished economic welfare. Russia’s invasion can affect wheat imports of countries like Turkey, India, Mongolia, and Egypt. Ukraine, Egypt, Turkey, and India registered trade surpluses, while others recorded deficits
 Research Implications - The ongoing conflict complicates assessing long-term consequences on global food security. Policymakers are advised to monitor closely, implement strategies to mitigate disruptions, and foster international collaboration to alleviate adverse effects on trade, economies, and food security, particularly of nations heavily reliant on Ukraine’s wheat exports, like Egypt, Turkey, Mongolia, Georgia, and Azerbaijan.

The Road to a Low Emission Society: Costs of Interacting Climate Regulations

AbstractTransportation is one of the main contributors to greenhouse gas emissions. Climate regulations on transportation are often a mix of sector-specific regulations and economy-wide measures (such as emission pricing). In this paper we consider how different and partly overlapping climate regulations interact and what are the effects on economic welfare, abatement costs and emissions? Our focus is on Norway, a nation where high taxation of conventional fossil-fuelled cars has paved the floor for another pillar of climate policies: promotion of electric vehicles (EVs) in private transport. Our contribution to the literature is two-fold. First, we analyse the costs and impacts of the partly overlapping climate regulations in transportation—the cap on domestic non-ETS emissions and the goal of all new cars for private households being EVs—focussing on the outcome in 2030. Second, we respond to a gap in the literature through a methodological development in economy-wide computable general equilibrium (CGE) approaches for climate policy by introducing EV technologies as an explicit transport equipment choice for private households. We find that, for the case of Norway, combining a specific EV target with policy to cap emissions through a uniform carbon price more than doubles the welfare costs.

Simulating the environmental and economic effects of a carbon tax in Vietnam: a static computable general equilibrium analysis

PurposeA carbon tax has been widely discussed and implemented in developed countries to mitigate carbon emissions, but this measure is still quite new in developing countries. Recently, the ambition of Vietnam's government in mitigating emissions has been mentioned in international commitments. To achieve these targets, the government is making efforts to seek and implement mitigation measures in the country. While carbon pricing was introduced in Vietnam, there is no study simulating the effects of a carbon tax in the country. This study simulates the environmental and economic effects of a carbon tax and then proposes appropriate policies in Vietnam.Design/methodology/approachThis study investigates the impact on the Vietnamese economy within the static computable general equilibrium (CGE) framework. Compared with previous models, the proposed model in this paper is a fairly standard CGE approach that tries to picture the economic system of Vietnam. In addition, a carbon tax on output will be modeled in this framework. This carbon tax mechanism is more flexible and direct when a carbon tax is based on direct emissions by industry level and the industry's carbon intensity. The paper decomposes the Vietnamese economy into 18 different production sectors, based on the different emission levels of CO2. The CGE model makes possible to examine the impact of a carbon tax on the whole economy through all possible channels and to differentiate a separate carbon tax among different production sectors. The impact of a differentiated carbon tax is explored not only at the macroeconomic level but also at each different industrial level. Another feature of this paper is to investigate the impact of reallocation revenue from the carbon tax.FindingsThis paper has found that by designing carbon tax scenarios at different carbon prices ($1/tCO2, $5/tCO2, $10/tCO2) with different targeted industries, this study shows that higher carbon prices cause greater damage to GDP and welfare, but also better reductions in emissions. In addition, a carbon tax on the energy sectors results in milder economic and welfare damage but less emission reduction than when levying on all sectors. At the sectoral level, a carbon tax might cause sectoral restruction. Interestingly, the electricity sector is the most affected and also is the main contributor to reducing emissions in Vietnam. Finally, the study also shows that reallocation policies of new revenue from the carbon tax would reduce the economic damage caused by carbon taxes, and in many cases promote GDP and welfare. However, these policies reduce the environmentally positive impact of the carbon tax and even induce an increase in emissions in some cases.Originality/valueThis paper studies the pure impacts of a carbon tax, it also simulates the impact of several recycling policies where the increased tax revenue is incorporated. Thereby, this research supports to design and implement carbon tax policies in Vietnam. This paper also would contribute to the literature an example of the adoption of the carbon tax in a developing country, and it could be a lesson for others with similar conditions. Compared with previous models, the proposed model in this paper is a fairly standard CGE approach that tries to picture the economic system of Vietnam. In addition, a more flexible carbon tax mechanism is proposed to improve adequate coverage of emission resources.

Carbon tax accompanied by a revenue recycling increases Australia's GDP: A dynamic recursive CGE approach

This study employs the dynamic recursive Computable General Equilibrium (CGE) approach to model Australia's economy. This carbon tax policy is designed based on Australia's economy, starting at A$23/tCO2, increasing over time and imposing uniformly on all industries. This study proposes two carbon tax policies and three revenue recycling approaches, and the prices and GDP variations are estimated during 2020 and 2035. This study confirms introducing a carbon tax policy decreases Australia's carbon emissions and reduces real consumption and GDP if it is not accompanied by a revenue recycling policy.But following a revenue-neutral policy and redirecting the carbon tax revenue into the economy through reducing income taxes and investing in research and development (R&D) projects leads to economic growth. This study confirms the implementation of a carbon tax associated with a suitable revenue recycling approach benefits Australia both economically and environmentally.

Implications for the Iranian economy from climate change effects on agriculture—a static computable general equilibrium approach

Implications for the Iranian economy from climate change effects on agriculture—a static computable general equilibrium approach

Economic Loss Assessment for Losses Due to Earthquake under an Integrated Building, Lifeline, and Transportation Nexus: A Spatial Computable General Equilibrium Approach for Shelby County, TN

Earthquakes have caused tremendous losses worldwide. Though unpredictable, comprehensive assessment of their impact on urban areas can facilitate effectiveness in mitigation strategies. This paper builds a spatial general equilibrium (SCGE) model for Shelby County, Tennessee, an area located in the most active seismic zone in the central and eastern U.S. Starting from the building, lifeline and transportation damages, this paper also develops means by which such damages can be integrated into the SCGE model for prompt effect estimation. Using novel approaches to represent substitution and shifting behaviors intra-regionally within the county, the model estimated a total of loss over $8 billion in domestic supply due to a hypothetical earthquake. Compared with the outcomes from the model without these behaviors, the magnitude of the losses is smaller in the model with these behaviors. This implies the resistance, resourcefulness and flexibility from economic resilience, as the level of physical damages do vary intra-regionally. Interestingly, although the percentage of losses in domestic supply varies almost linearly with the percentage loss in physical damage intra-regionally, the losses in employment are relatively evenly distributed. This also emphasizes the importance of the shifting and substitution behaviors which make the model profoundly spatial.

The potential impact of introducing a social security system in the State of Palestine: A computable general equilibrium approach

AbstractThis article assesses the potential impact for the State of Palestine (West Bank and Gaza) of enforcing the enactment of the currently suspended Social Security Law (No. 19 of 2016). Using a computable general equilibrium model, we simulate different scenarios associated with the enactment of the social security system on key macroeconomic variables, such as GDP, private consumption, government spending, investment and employment, for the period 2020–2030. We evaluate the influence on the economy of introducing a social security system for private‐sector workers, as set out in the 2016 law, and compare the simulation results of each scenario to the baseline. In each scenario, we consider different options concerning severance payment duration and different options for the investment strategy of social security contributions. However, for employees in Gaza, the article does not consider severance payments due to economic difficulties and the Israeli closure policy.

A Korea-Kenya Free Trade Agreement and Its Economic Impact: A Computable General Equilibrium Approach

Purpose – This study assesses the impact of a potential Korea-Kenya FTA on the global economy, which includes the US, EU, UK, China, and Japan, using the Global Trade Analysis Project (GTAP) model. Design/Methodology/Approach – The study employs a static global multi-sector CGE model using the GTAP database version 10 with the base year of 2014. For this study, we aggregate the 141 regions and 65 sectors of the GTAP database into 16 regions and 57 sectors. Four policy simulations were implemented based on tariffs and ad valorem equivalents (AVEs) of non-tariff measures (NTMs) estimated by Kitetu and Ko Jong-Hwan (2021). Findings – Simulation results suggest that the real GDP of Korea will likely increase by 0.001% to 0.002%, with welfare increasing by US$1.8 million to US$74.7 million. In comparison, the real GDP of Kenya will likely rise by 0.003% to 0.045%, while welfare will rise by US$1.8 million to US$ 75.3 million. Imports by both countries will rise at a higher rate than exports. For Kenya, domestic output increases in agriculture, extraction, and service sectors, and for Korea, output goes up in processed food and light and heavy manufacturing sectors. Research Implications – The novelty of this paper is in the first empirical quantification of the economic impact of a Korea-Kenya FTA on not only its members but also its trading partners, such as the US, EU, UK, China, and Japan. Moreover, this study provides a comprehensive overview of the impact of a potential FTA between Korea and Kenya by reducing and eliminating tariffs and AVEs of NTMs.

THE REGIONAL ECONOMIC IMPACTS OF CLIMATE CHANGE ON FAMILY FARMING AND LARGE-SCALE AGRICULTURE IN BRAZIL: A COMPUTABLE GENERAL EQUILIBRIUM APPROACH

This paper analyzes the regional economic impacts of climate change (CC) on the agricultural productivity of crops linked to family farming and large-scale agriculture in Brazil. Variations in agricultural productivity estimated according to CC scenarios RCP 4.5 and RCP 8.5 [ IPCC ( 2014 ). Climate Change 2014: Synthesis Report. Contribution of Working Groups I, II and III to the Fifth Assessment Report of the Intergovernmental Panel on Climate Change, Core Writing Team, RK Pachauri and LA Meyer (eds.), IPCC, Geneva, Switzerland, 151pp.], between 2021 and 2050, were used as inputs in the Computable General Equilibrium (CGE) model AGRO-BR to project the economic impacts of the phenomenon. The model presents regional configuration composed of the 27 Brazilian Federation Units and 42 agricultural sectors, disaggregated into family farming and large-scale agriculture sectors. The results indicate that the North and Northeast regions would be negatively affected, Midwest and Southeast would suffer moderate impacts, while the South region would benefit mostly. São Paulo, Paraná, and Rio Grande do Sul would show economic growth, softening the negative impacts on national GDP. Regional disparities and the deterioration of food security conditions could increase in Brazil.

An economy-wide impact assessment of agriculture land reform in South Africa

South Africa has been battling with getting land reform right since the advent of democratic rule in 1994 The need to expedite land reform in the country has given rise to a number of radical approaches, including the topic and controversial expropriation of land without compensation discourse. The simulation results presented in this paper provide nuanced policy options for land redistribution in South Africa in the face of the looming expropriation of land without compensation. The analysis in this paper is specific to agricultural land as opposed to land in general. We carried out scenario simulation through Computable General Equilibrium approach using the modified University of Pretoria General Equilibrium Model (UPGEM), which is solved using GEMPACK solution software. Our simulation revealed that there would be adjustment costs regardless of the option(s) chosen. The Inclusive Scenario came up as the most suitable policy option in terms of minimal adjustment costs and allowing the sector to continue to grow, albeit at a lower rate compared to the status quo. Given that agricultural land reform is imperative in South Africa, policy makers should opt for the policy option that is least disruptive to the economy while achieving the desired outcome of more equitable agricultural land ownership and broader participation in the agricultural sector by the majority in the country. Thus, the Inclusive Scenario was found to be the most suitable policy option for agriculture land reform in South Africa.

The Impact of Corporate Income Tax Changes on the Welfare of Urban and Rural Households: A Computational General Equilibrium Approach

The Impact of Corporate Income Tax Changes on the Welfare of Urban and Rural Households: A Computational General Equilibrium Approach