Table of CGE Studies

Author

Parameters Scenarious Results Additional Remarks

Peter

As in 2 but with the opposite sign

Small economy with the exception of export.

Fixed nominal wage. Fixed capital stock, no capital mobility between sectors. Total amount of investments is fixed (the marginal

prospensity to save adapts instead of investments to keep the savings-investments identity balanced). Low trade elasticities to concentrate on the short-run effects.

Zalai, E.

(1998)

HUMUS

(Hungary) Transition ng Static

S = 22; H

= ng

Trade - ng;

LES-synthetic

(fixed shares) ng ng

Small economy with the exception of export.

Some elements of central planning (e.g.

differentiation between eastern and western goods). Distinction between energy and nonenergy at the intermediate level.

Endogenous wage setting

149

Results depend on the magnitude of elasticities and on the method of tax revenues distribution

Five-stage nested production function.

Exogenous wages, unrestricted labour supply.

Higher elasticities imply lower carbon tax rate for a given target CO2 reduction. More information in Welsch, H., and Hoster, F. (1995) A General Equilibrium Analysis of European Carbon/

Energy Taxation: Model Structure and Macroeconomic Results. emissions reduction at a smaller GDP cost than sulphur content taxation. In the longer run sulphur taxation brings more emission reduction, however GDP loss is also higher

Nested energy-economy type production function. Exogenous labour growth and technological progress drives the dynamics in this model. No mention of values of elasticities used

Export (-); Agricultural output (-)

Small country, endogenous export price for some sectors. Fixed nominal, but floating real (ratio of tradables to non-tradables) exchange rate. Sector specific distortion parameter used to highlight the capital and labour return differential across sectors. Oil sector was not included in the production, but its effect is modelled as inflow of revenues

150 contributed around 50% to overall WA GSP growth in the 1990s.

Single-region, specifically designed for WA model. Extended Input-output table used as the database. Five different combinations of assumptions about exchange rate and wages were used distinguishing between fixed, semi-fixed and flexible.

1. Negative impact on most of the economic indicators, such as employment, output etc. 2. Much less negative impact

Capital is assumed to be growing at a constant rate of 0.04% per year and determines the economic growth. Labour supply is also exogenously growing at approx. 0.8% per year.

The model projects to 2016 and only this year's results are considered

Out of the three effects the term-of-trade and savings effects had less negative impact on welfare (defined as the sum of national income and value of leisure at current wage rate) than the direct effect (reduction in factor productivity), which along, accounted for 50-84% of the total welfare loss. The savings effect was responsible for about 15% of the total loss. The magnitude of the terms-of-trade effect depended on the percentage of import in energy consumption, and accounted for about 35% of the total welfare reduction.

Extensions include the level of energy sector disaggregation and more comprehensive treatment of oil import. To exclude the dynamic effect of savings and investments, savings assumed no longer to be driven by return on capital, but represent fixed share of household income. Terms-of-trade effect was eliminated by assuming that the imported oil is purchased at the cost of domestic production, thus the difference between the market price and domestic production price accrues to the capital owner in the home country rather than foreign producers. The importance of the direct effect (changes in factor productivity) was highlighted by excluding both, savings-investments effect and terms of trade effect.

151

1. All prices decrease; increase in production, in particular textile, printing and dwellings. 2.

Production in all sectors increases almost on the on-to-one basis, with lowers elasticities for agric. and dwel; prices decrease for high labour inputs sectors. 3. 1% increase causes prices to fall by apprx. 0.5-1%. 4.

Results vary depending on the sector

Full employment of labour and capital and perfectly mobile across sectors. Production function is Cobb-Douglas. Exogenously determined imports and exports (using fixed production coefficients); in addition import is split into competitive and not competitive, which further split into imports of consumption and production goods. Solution (in terms of growth rates of endogenous variables) is obtained solving the system of 86 linear equations

1. Real output decreases by 0.63%(0.49) due to currency appreciation; Consumption increases by 0.72%(0.48) due to increase in income; Income inequality increases. 2. Similar results, notable increase of light and food industries.

Results reported only for the case of Poland.

Zero substitution elasticity for import and 1 for export

10% increase in the oil price under: 1. Floating nominal exchange rate 2. Fixed nominal exchange rate

Under both scenarios balance of trade improves. 1. Moderate Dutch Disease effects: exchange rate appreciation; increase in the price of non-tradables;

manufacturing suffers most. 2.

Higher overall price increase and slower GDP growth than in 1;

Real investments decline;

Small economy. Payments to foreign

shareholders directly linked to the oil revenues and increases in taxes from the oil sector (except product taxes) fully invested abroad.

Limited labour mobility, capital and wages are sector specific. The model's solution is found in percentage changes in variables using GEMPAC software.

152 Appendix C – Chapter 3