The effects of Paris agreements on Korean economy and trade analyzed by the computational general equilibrium method considering firm’s heterogeneity

2018 ◽  
Vol 22 (3) ◽  
pp. 280-305
Author(s):  
Jae-whak Roh ◽  
Hyunjae Kim
Keyword(s):  
General Equilibrium ◽  
Economic Impact ◽  
Computable General Equilibrium ◽  
Carbon Emission ◽  
Electricity Price ◽  
Cge Model ◽  
Content Type ◽  
Korean Economy ◽  
Reduce Carbon Emission ◽  
Paris Convention

Purpose During the Paris Convention, Korean Government made commitment to curb carbon emission by 37 percent by the year of 2030. Since then there has been constant debate, both in media and academia, as to whether attempts to reduce carbon emission would spell the concomitant economic slowdown. The purpose of this paper is to build a Computable General Equilibrium (CGE) model to see the effects of emission decrease on Korea economy. Design/methodology/approach To answer the above question, we build a comprehensive framework to gauge the economic impact of Paris Convention through the lens of Computable General Equilibrium (CGE) model using Armington and Melitz model. Findings Contrary to conventional wisdom, Korea’s economic performance in terms of welfare remains robust when the carbon emission is reduced. Broadly speaking, Korea’s welfare does not contract significantly in part due to expansion at the export market. For instance, the energy intensive industry (EIT) is affected most directly from the Paris Convention commitment and yet it experiences growth in export. On the contrary, the authors find that the general economic impact on Korea’s output is negative. The additional experiment using Melitz model shows that as the carbon reduction is enforced, both the number and the average productivity of the exporting firms increase in the EIT sector, which the authors refer in the paper as the “Melitz Effect.” Practical implications This paper shows that what can be occurred in Korean industries by emission decrease commitment. Social implications One byproduct from restricting carbon emission is the surge in the electricity price. This is due to the fact that industries have to shift away from traditional fuels such as oil to electricity for energy. Therefore the authors propose that industrial policies aimed at balancing electricity price should accompany the plan to reduce carbon emission. Originality/value For Korean economy, the effects of emission reduction is researched using Armington and Melitz model at the same time. Especially, this is the first research case using the Melitz model in this Korean topic.

scholarly journals The Issue of Macroeconomic Closure Revisited and Extended

2016 ◽  
Vol 66 (1) ◽  
pp. 1-31
Author(s):  
Ernő Zalai ◽  
Tamás Révész
Keyword(s):  
General Equilibrium ◽  
Open Economy ◽  
Computable General Equilibrium ◽  
Statistical Data ◽  
Competitive Equilibrium ◽  
Numerical Models ◽  
Cge Model ◽  
Sector Model ◽  
Cge Models ◽  
Policy Simulations

Léon Walras (1874) had already realised that his neo-classical general equilibrium model could not accommodate autonomous investments. In the early 1960s, Amartya Sen analysed the same issue in a simple, one-sector macroeconomic model of a closed economy. He showed that fixing investment in the model, built strictly on neo-classical assumptions, would make the system overdetermined, and thus one should loosen some neo-classical conditions of competitive equilibrium. He analysed three not neo-classical “closure options”, which could make the model well-determined in the case of fixed investment. His list was later extended by others and it was shown that the closure dilemma arises in the more complex computable general equilibrium (CGE) models as well, as does the choice of adjustment mechanism assumed to bring about equilibrium at the macro level. It was also illustrated through several numerical models that the adopted closure rule can significantly affect the results of policy simulations based on a CGE model. Despite these warnings, the issue of macro closure is often neglected in policy simulations. It is, therefore, worth revisiting the issue and demonstrating by further examples its importance, as well as pointing out that the closure problem in the CGE models extends well beyond the problem of how to incorporate autonomous investments into a CGE model. Several closure rules are discussed in this paper and their diverse outcomes are illustrated by numerical models calibrated on statistical data. First, the analyses are done in a one-sector model, similar to Sen’s, but extended into a model of an open economy. Next, the same analyses are repeated using a fully-fledged multi-sectoral CGE model, calibrated on the same statistical data. Comparing the results obtained by the two models it is shown that although they generate quite similar results in terms of the direction and — to a somewhat lesser extent — of the magnitude of change in the main macro variables using the same closure option, the predictions of the multi-sectoral CGE model are clearly more realistic and balanced.

scholarly journals Tourism taxes and negative externalities in tourism in australia: A CGE approach

2013 ◽  
Vol 10 (4) ◽  
pp. 200-214
Author(s):  
Ranjith Ihalanayake
Keyword(s):  
General Equilibrium ◽  
Computable General Equilibrium ◽  
International Tourism ◽  
Cge Model ◽  
Negative Externalities ◽  
Economic Activities ◽  
Long Run ◽  
Tourism Sector ◽  
Australian Economy ◽  
Short Run

In this paper we analyse general equilibrium effects of an increase in a tourism tax which we hypothetically designed to internalise negative externalities of international tourism in Australia. Several simulations were carried out using a computable general equilibrium (CGE) model of the Australian economy. The simulations were carried out assuming two different economic environments, the short-run and the long-run. The simulation results suggest that due to an increase in tourism taxes, the international tourism sector tends to contract while the other sectors expand. Overall, an increase in tourism taxes appears to be welfare improving in the long-run though it generates a marginal contraction in overall economic activities in the short run.

scholarly journals DAMPAK KERJA SAMA PERDAGANGAN INDONESIA DENGAN EURASIAN ECONOMIC UNION (EAEU) TERHADAP PEREKONOMIAN INDONESIA

2018 ◽  
Vol 12 (2) ◽  
pp. 161-180
Author(s):  
Deky Paryadi ◽  
Aziza Rahmaniar Salam
Keyword(s):  
General Equilibrium ◽  
Computable General Equilibrium ◽  
Cge Model ◽  
Eurasian Economic Union ◽  
Comparative Advantages ◽  
Vegetable Foodstuffs ◽  
Economic Union ◽  
The Impact ◽  
Eurasian Region ◽  
Elimination Scheme

 Abstrak Kawasan Eurasia merupakan wilayah yang penting secara geopolitik dan geostrategi bagi perdagangan Indonesia. Melihat potensi yang dimiliki oleh negara-negara yang tergabung dalam Eurasian Economic Union (EAEU), Indonesia diharapkan dapat memanfaatkan peluang yang terbuka. Penelitian ini bertujuan untuk mengetahui potensi daya saing komoditas serta dampak kerja sama perdagangan Indonesia-EAEU. Metode analisis yang digunakan adalah Trade Complementary Index (TCI), Revealed Symetric Comparative Advantages (RSCA) dan Computable General Equilibrium (CGE) model dengan data dasar GTAP versi 9 menggunakan enam simulasi. Berdasarkan analisis TCI, tingkat kesesuaian ekspor EAEU terhadap struktur impor Indonesia lebih tinggi dibandingkan ekspor Indonesia terhadap struktur impor EAEU. Dengan melihat dampak kerja sama perdagangan Indonesia-EAEU terhadap makroekonomi Indonesia, penurunan tarif bea masuk sebesar 50% untuk seluruh produk Indonesia dan EAEU merupakan alternatif kebijakan terbaik. Indonesia perlu menjajaki kemungkinan kerja sama dengan EAEU dengan pendekatan berupa eliminasi 50% pada seluruh pos tarif secara bertahap. Selain itu, disarankan Indonesia fokus pada komoditas yang memiliki daya saing di pasar EAEU yaitu sektor animal; vegetable; foodstuffs; plastics/ rubber; raw hides; woods; textile; stone/glass; machinery; dan transportation.AbstractThe Eurasian region is an important area for Indonesia in term of geopolitic and geostrategy. Due to the economic potential of EAEU countries, Indonesia must take advantage of it. This study aims to determine the potential competitiveness of commodities and the impact of trade cooperation between Indonesia-EAEU. Methods used in this study were Trade Complementary Index (TCI), Revealed Symetric Comparative Advantages (RSCA) and Computable General Equilibrium (CGE) model utilizing basic data of GTAP version 9 of six simulations. By using TCI method it was found that the comformity level of EAEU's export to Indonesia's import structure is higher than Indonesia's exports to the EAEU import structure. Looking at the impact of Indonesia-EAEU trade cooperation on Indonesia’s economy, tariff reduction of 50% for all Indonesian products and EAEU is the best policy alternative for Indonesia. Therefore, It is a must to Indonesia to explore the possibility of cooperation with EAEU with a 50% elimination scheme gradually to all tariff lines. Indonesia should also focus on commodities which have competitiveness in EAEU market i.e. animal; vegetable; foodstuffs; plastics/rubber; raw hides; woods; textile; stone/glass; machinery; and transportation.

scholarly journals General Equilibrium Effects of Lower Labor Tax Burden in Croatia

2016 ◽  
Vol 19 (s1) ◽  
pp. 1-14 ◽  
Author(s):  
Ozana Nadoveza ◽  
Tomislav Sekur ◽  
Marija Beg
Keyword(s):  
Sensitivity Analysis ◽  
General Equilibrium ◽  
Computable General Equilibrium ◽  
Tax Burden ◽  
Cge Model ◽  
Policy Changes ◽  
Domestic Production ◽  
Labor Tax ◽  
Endogenous Variables ◽  
Cge Modeling

AbstractThis paper examines the effects of lower labor tax burden in Croatia by using Computable general equilibrium (CGE) model. It is a 5-sector (households, firms, government, investors and foreigners) model and economy is disaggregated on three highly aggregated sectors. One of the major advantages of CGE modeling is the evaluation of the overall effects of policy changes, shocks and reforms in the economy. We do this by lowering taxes on labor and simulating changes of all endogenous variables in the model simultaneously. Lastly, we provide sensitivity analysis results. Our results suggest that it is possible to encourage domestic production by reducing taxes on labor, but the potential effects on unemployment should be revised as to get more accurate estimates.

scholarly journals Zero-rating food in South Africa: A computable general equilibrium analysis

2004 ◽  
Vol 7 (3) ◽  
pp. 521-531 ◽  
Author(s):  
M Kearney ◽  
J H Van Heerden
Keyword(s):  
General Equilibrium ◽  
Financial Services ◽  
Computable General Equilibrium ◽  
Positive Impact ◽  
Equilibrium Analysis ◽  
Cge Model ◽  
Percentage Increase ◽  
General Equilibrium Analysis ◽  
Revenue Sources ◽  
Poor Households

Zero-rating food is considered to alleviate poverty of poor households who spend the largest proportion of their income on food.  However, this will result in a loss of revenue for government.  A Computable General Equilibrium (CGE) model is used to analyze the combined effects on zero-rating food and using alternative revenue sources to compensate for the loss in revenue.  To prohibit excessively high increases in the statutory VAT rates of business and financial services, increasing direct taxes or increasing VAT to 16 per cent, is investigated.  Increasing direct taxes is the most successful option when creating a more progressive tax structure, and still generating a positive impact on GDP.  The results indicate that zero-rating food combined with a proportional percentage increase in direct taxes can improve the welfare of poor households.  

scholarly journals Impact assessment and a fiscal recovery policy for tsunami risk: GIS and the general equilibrium approach in Hakodate city, Japan

2020 ◽  
pp. 239980832097786
Author(s):  
Hajime Tanaka ◽  
Michael C Huang
Keyword(s):  
Information System ◽  
Geographic Information System ◽  
General Equilibrium ◽  
Impact Assessment ◽  
Economic Impact ◽  
Food Processing ◽  
Computable General Equilibrium ◽  
Investment Strategy ◽  
Geographic Information ◽  
Evidence Based

Given Japan’s substantial exposure to many kinds of natural hazards, such as earthquakes, tsunamis, and typhoons, it has been a priority to invest in resilience, guided by evidence-based modeling. In 2011, the Great East Japan Earthquake and Tsunami became the costliest natural disaster ever recorded. This study applied a geographic information system using assumed tsunami-affected data calibrated in a recursive computable general equilibrium model to perform an economic impact assessment and an estimated recovery budget. We simulated 100 years of tsunamis and a 10-year sectoral recovery package for the sectors related to the ocean economy, such as kelp, net fishery, squid, other fisheries, food processing, and recreation, with a capital-use subsidy policy regarding investment strategy. We found that the aqua sector is incredibly vulnerable and would not recover with the capital-use subsidy within Hakodate City’s financial capability. Nevertheless, the recovery policy could still ease output price changes. On the other hand, the recreation sector could recover to pre-disaster conditions, but at huge fiscal and social costs. Meanwhile, the food processing sector’s recovery could generate social benefits and have a spillover effect on other fisheries sectors. The application of geographic information system in tsunami-prone areas could strengthen the precision of economic analysis. Such evidence-based modeling could visualize the economic impact to assist policymakers and stakeholders in foreseeing disaster risk and implementing more effective building resilience measures.

Economic impact of data localization in five selected African countries

2018 ◽  
Vol 20 (4) ◽  
pp. 337-357
Author(s):  
Mona Farid Badran
Keyword(s):  
South Africa ◽  
General Equilibrium ◽  
Computable General Equilibrium ◽  
Research Paper ◽  
Policy Recommendations ◽  
African Countries ◽  
Content Type ◽  
Cross Border ◽  
The Impact ◽  
The Eu

Purpose The purpose of this study is to quantify the impact of laws and regulations that govern the cross-border flow of data on the economies of five selected African countries, namely, Egypt, Morocco, South Africa, Kenya and Mauritius. Moreover, this study addresses the state of cloud computing in Africa. Finally, policy recommendations are provided in this respect. Design/methodology/approach To reach accurate finding the Global Trade Analysis Project (GTAP) data was used, and then the computable general equilibrium (CGE) was computed to estimate the total cost on the economy. Using the three data regulations linkages indexes (DRLs), the increased administrative cost effect was analyzed on five to six major economic sectors in the target countries. This was followed by estimating the loss in sector-wide total factor productivity (TFP) (for the five to six shortlisted sectors). Using this data, the computable general equilibrium model (CGE) was computed, in order to estimate the economy-wide impact. Based on these findings, a set of recommendations were offered to the policy maker, reflecting the obtained results and conclusions and their implications on drafting data-related policies. Findings The obtained data indexes reveal that Mauritius is the country with the most laws and regulations governing the cross border flow of data, followed by South Africa Egypt to a lesser extent and finally Morocco and Kenya both showing an obvious lack of data regulations. The small value of the estimated elasticity of the selected countries compared to the value of the estimated elasticity in the EU-0.347 shows that the impact of data localization is less in the selected African countries than in the other set of EU countries examined in the research paper. This is because the former has smaller economies with fewer linkages to the global economy and are less reliant on sectors that are heavy users of data. Thus, the overall impact of data localization was not as profound on TFP as is the case in advanced economies. This research paper arrives at the conclusion that fighting the trend of data localization is crucial. In fact, data localization hinders the necessary and essential role of global trade in realizing economic development. Specifically, this is evident in the increase in production costs as reflected in the increase of the prices of goods, which would lead to a decline in incomes. Originality/value Global studies looked at the impact of data localization on the EU, as well as China, India, Korea and Vietnam, providing some data on Asia Pacific. However, no study has ever been conducted on the Middle East and Africa. This study aims to fill this gap. The approach of this study is to capture the extent of data localization mandates encoded in the laws of each of the selected five African countries showing how these mandates govern their cross-border data flow and, in turn, affect their economies. Furthermore, the policy recommendations section of this research paper makes a contribution to the existing literature.

scholarly journals Integrated Model of Computable General Equilibrium and Social Cost Benefit Analysis of an Indian Oil Refinery: Future Projections and Macroeconomic Effects

2018 ◽  
Vol 10 (1-2) ◽  
pp. 96-125
Author(s):  
Sumana Chaudhuri ◽  
Shovan Ray ◽  
Ganesh-Kumar
Keyword(s):  
General Equilibrium ◽  
Computable General Equilibrium ◽  
Cost Benefit Analysis ◽  
Cost Benefit ◽  
Oil Refinery ◽  
Cge Model ◽  
Benefit Analysis ◽  
Model Framework ◽  
Financial Flows ◽  
Macroeconomic Effects

Cost benefit analysis (CBA) has long been used as a useful tool to appraise and evaluate the value of a range of investment projects to a society. Certain aspects of this method such as the appropriate discount rate is an important concern, because the choice of discount rates deeply affect the valuations of future income streams. Other aspects concerning financial flows and appropriate ‘shadow prices’ have also received considerable attention. However, when a megaproject with the character of a ‘universal intermediate’ is considered, its multiplier effects may be wide-ranging and permeate several economic and social layers and may be captured only in the aggregates. This study examines the costs and benefits of Vadinar refinery in Gujarat with a focus on this welfare dimension on society for the project. The framework explores a methodological breakthrough in CBA studies. In constituting the macroeconomic effects of expansion of the mega oil refinery, the wider economic impact (WEI) is estimated using the computable general equilibrium (CGE) model and incorporated into the CBA. This assimilation of CBA with macroeconomic externality obtained from the CGE model framework is perhaps only one of its kind in economic analysis of major infrastructure projects of any country. CBA when combined with CGE as an analytical tool can be gainfully employed to appraise or evaluate large scale projects like oil refineries. JEL Classification: B41, C51, C52, C53, C54, C55, D50, D58, D60, D61, D62, H23, H43, L71, O22, Q43

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