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Taoyuan Wei and Asbjørn Aaheim
This study aims to identify the current state of the art and the gaps in the application of computable general equilibrium (CGE) models on studying climate change adaptation.
Abstract
Purpose
This study aims to identify the current state of the art and the gaps in the application of computable general equilibrium (CGE) models on studying climate change adaptation.
Design/methodology/approach
A systematic review is conducted to select, classify and analyze relevant studies from two databases of Web of Science and Scopus.
Findings
Totally, 170 articles based on selected keywords were found from both databases, where 56 articles were duplicates. The authors further excluded 17 articles owing to preliminary exclusion criteria. Hence, 97 papers were selected for full-text review and more detailed assessment. Only a few of the studies explicitly have addressed the role of autonomous adaptation embodied in the CGE models. Over one-third of the studies have focused on planned adaptation without explicitly mentioning autonomous adaptation. Agriculture was the most addressed sector, and country-level models are the most adopted. Only one article has focused on South America.
Research limitations/implications
The review suggests that autonomous adaptation embodied in CGE models was not well addressed in the literature. As the limited studies have shown that autonomous adaptation can dramatically mitigate direct climate change impacts, further studies are needed to examine the importance of the autonomous adaptation for better understanding of climate change impacts. Furthermore, CGE models can provide a joint assessment considering both mitigation and adaptation strategies and management measures as such models have also been widely used to address effects of mitigation measures in the literature.
Originality/value
The studies on climate change adaptation based on CGE models have been systematically reviewed, and state-of-the-art knowledge and research gaps have been identified.
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Syed Shoyeb Hossain, Yongwei Cui, Huang Delin and Xinyuan Zhang
Evaluating the economic effects of climate change is a pivotal step for planning adaptation in developing countries. For Bangladesh, global warming has put it among the most…
Abstract
Purpose
Evaluating the economic effects of climate change is a pivotal step for planning adaptation in developing countries. For Bangladesh, global warming has put it among the most vulnerable countries in the world to climate change, with increasing temperatures and sea-level rise. Hence, the purpose of this paper is to examine how climate change impacts the economy in Bangladesh in the case of climate scenarios.
Design/methodology/approach
Using a dynamic computable general equilibrium (CGE) model and three climate change scenarios, this paper assesses the economy-wide implications of climate change on Bangladesh’s economy and agriculture. It is clear from the examination of the CGE model that the impacts of climate change on agricultural sectors were felt more sharply, reducing output by −3.25% and −3.70%, respectively, and increasing imports by 1.22% and 1.53% in 2030 and 2050, compared to the baseline.
Findings
The findings reveal that, relative to baseline, agricultural output will decline by a range of −3.1% to −3.6% under the high climate scenario (higher temperatures and lower yields). A decrease in agricultural output results in declines in agricultural labor and household income. Household income falls in all categories, although it drops the most in urban less educated households with a range of −3.1% to −3.4%. On the other hand, consumption of commodities will fall by −0.11% to −0.13%, according to the findings. Although climate change impacts had a relatively small effect on gross domestic product, reducing it by −0.059% and −0.098% in 2030 and 2050, respectively.
Practical implications
As agricultural output, household consumption and income decline, it will impact the majority of the population’s health in Bangladesh by increasing malnutrition, hidden hunger, poverty, changing food environment, changing physical and mental health status and a changing health-care environment. Therefore, population health and food security will be a top socioeconomic and political concern for Bangladesh Government.
Originality/value
The examination of the dynamic CGE model is its originality. In conclusion, the evidence generated here can provide important information to policymakers and guide government policies that contribute to national development and the achievement of food security targets. It is also necessary to put more emphasis on climate change issues and address potential risks in the following years.
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Noel D. Uri and Roy Boyd
Examines the impact of the sugar tariff‐rate import quota programme onthe United States economy. Uses a computable general equilibrium modelcomposed of 14 producing sectors, 14…
Abstract
Examines the impact of the sugar tariff‐rate import quota programme on the United States economy. Uses a computable general equilibrium model composed of 14 producing sectors, 14 consuming sectors, six household categories classified by fincome, and a government. Examines the effects of abolishing the tariff‐rate import quota on sugar prices and quantities. Suggests that a complete elimination of the sugar programme would result in lower output by all producing sectors (by about $2.85 billion) but, for all producing sectors besides the agriculture programme crops, crude oil, and petroleum refining sectors, output would actually increase (by about $2.98 billion). There would also be an increase in the consumption of goods and services (by about $197 million), and an increase in welfare (by about $121 million). The government would realize a reduction in revenue of about $15 million. When subjected to a sensitivity analysis, the study′s results are reasonably robust with regard to the assumption of the value of the own‐price elasticity of demand for sugar – i.e., while the model′s equilibrium values do vary in response to different assumptions of the values of this elasticity, the fluctuations are not so enormous as to suggest that the model is unrealistically sensitive to these parameters.
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Elizabeth Louisa Roos and Philip David Adams
This paper aims to provide a quantitative assessment of the broad economic effects of tax policy reform in the Kingdom of Saudi Arabia (KSA).
Abstract
Purpose
This paper aims to provide a quantitative assessment of the broad economic effects of tax policy reform in the Kingdom of Saudi Arabia (KSA).
Design/methodology/approach
Using a dynamic computable general equilibrium (CGE) model of the KSA, three simulations are run. The first simulation is the baseline simulation, which generates growth paths of the Saudi economy in the absence of tax reform. In developing the baseline simulation, this study incorporates forecasts from the International Monetary Fund. The remaining simulations are policy simulations. A policy simulation deviates from the baseline simulation in response to a policy change. In the first policy simulation, this study introduces a value-added tax (VAT) that generates SAR 35bn. This study assumes budget neutrality with the additional tax revenue transferred to households via a lump sum payment. In the second policy simulation, this study introduces a corporate income tax that generates SAR 35bn. This study then calculates and compares the distortion these taxes introduce into the economy.
Findings
This study finds that although the introduction of new taxes increases government tax revenue, markets are distorted lowering efficiency and production. An introduction of VAT increases the cost of consumption relative to the cost of production. As a consequence, the real cost of labour increases lowering employment in the short run. Employment moves to the baseline, as wages adjust capital and real gross domestic product (GDP) is below base throughout the simulation period. The second simulation is an increase in the corporate tax rate with lowers the post-tax rates of return investors receive. This simulation shows that the negative impact on investment, capital and GDP is larger with the introduction of a corporate tax than with the VAT.
Research limitations/implications
Literature focusing on tax policy reform in the Gulf Cooperation Council and, specifically, Saudi Arabia is limited. This paper contributes to the literature by focusing on the following: understanding the impact and mechanisms through which changes in taxation impact the economy more generally; understanding the potential harm caused to allocative efficiency and production due to taxes; and ways in which fiscal reform might complement other reforms such as efforts to diversify the economy, labour market and energy price reforms. This improves the information base available to policymakers charged with designing an optimal tax system that meets all future requirements of a country such as the KSA.
Originality/value
The authors developed and applied a CGE model for the KSA to analyse the impact of VAT and corporate tax on the Saudi economy. To the best of the authors’ knowledge, there are no recent CGE models for Saudi Arabia that have been used for tax policy or quantifying the potential harm to the economy when new taxes are introduced.
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Abdykappar Ashimov, Bahyt Sultanov, Zheksenbek Adilov, Yuriy Borovskiy, Nikolay Borovskiy and Askar Ashimov
The purpose of this paper is to present some results of the development of parametrical regulation theory elements for computable general equilibrium models (CGE models), taking…
Abstract
Purpose
The purpose of this paper is to present some results of the development of parametrical regulation theory elements for computable general equilibrium models (CGE models), taking into consideration their peculiarities.
Design/methodology/approach
Theoretical results have been obtained by means of applying geometrical methods for variational problems and methods of the theory of discrete dynamic systems. These results have been used for solving concrete practical problems.
Findings
The authors proved a statement on the existence of solution for variational calculus problem on the choice of the optimal laws of parametrical regulation within the given finite set of algorithms for discrete dynamic systems. A statement has been proved on sufficient conditions for the existence of an extremal's bifurcation point of variational calculus problem on the choice of the optimum laws of parametrical regulation within the given finite set of algorithms for discrete dynamic systems. Optimal laws of parametrical regulation (on the level of one and two parameters) of economic system evolution on the basis of the examined mathematical model have been defined. The bifurcation line was constructed for the given area of uncontrolled parameter values.
Practical implications
The research results can be applied for the choice and realization of an effective state budget and tax policy.
Originality/value
The paper elaborates the elements of parametrical regulation theory of economic system development on the basis of CGE models and shows the effectiveness of parametrical regulation theory application on the example of one CGE model.
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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…
Abstract
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.
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Roberto Roson and Camille Van der Vorst
This survey presents the recent and rapidly expanding literature, which analyses the economic impacts of the COVID-19 pandemic, by means of Computable General Equilibrium (CGE…
Abstract
This survey presents the recent and rapidly expanding literature, which analyses the economic impacts of the COVID-19 pandemic, by means of Computable General Equilibrium (CGE) modelling. It does so not only by contrasting and assessing the different methodological approaches, and the key findings of the simulation exercises, but also by putting the various contributions in a historical perspective. This is necessary because each CGE-based study should be evaluated while keeping in mind when it was realised, since questions, priorities, expectations have been constantly changing during the spreading of the pandemic.
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