Quantifying Foreign Direct Investment Productivity Spillovers: A Computable General Equilibrium Framework for China

We construct a static computable general equilibrium (CGE) model to quantify the endogenous productivity spillovers from foreign-invested firms to domestic firms, taking the Chinese economy as a case study. The coefficients of four spillover channels are estimated from econometric analysis. The simulations are conducted under two alternative market structures, namely perfect competition and monopolistic competition. Simulation results indicate that the spillover premia are positive in terms of national total output, GDP and welfare. The spillover effect is more prominent when the market structure is relatively monopolistic. FDI spillovers can also result in more product varieties produced by domestic enterprises, and can also help domestic enterprises increase their production scale.productivity spillovers, foreign direct investment, computable general equilibrium models

General Equilibrium Dynamic Models and the Doha Round Impact on Underdeveloped Economies

The authors have focused on the provision of a general outlook on global multiregional models that enable the study of the effects of commercial policies, and have particularly analysed the models that can be applied to underdeveloped economies. Starting from a simple model, the hypotheses introduced into general equilibrium models are analysed, focusing on the study of commercial policies. Following a synthetic description of the main Walrasian global multiregional models, selected according to the possibility of applying these instruments to the analysis of commercial policies in underdeveloped countries, attention is particularly given to the main limitations entailed by these models, thus emphasizing their disagreement with the characteristics of the underdeveloped economies. Moreover, the study underlines the hypotheses according to which these models would not be suitable for the economies of those states. The authors also insist on the impact of the possible scenarios derived from the Doha Round, which have caused significant assessment differences.general equilibrium models, trade policies, trade predictions, Doha Round scenario

Trade Liberalisation, Growth and Poverty in Senegal: a Dynamic Microsimulation CGE Model Analysis

Much current debate focuses on the role of growth in alleviating poverty. However, the majority of computable general equilibrium (CGE) models used in poverty and inequality analysis are static in nature. The inability of this kind of model to account for growth (accumulation) effects makes them inadequate for long run analysis of the poverty and inequality impacts of economic policies. They exclude accumulation effects and do not allow the study of the transition path of the economy where short run policy impacts are likely to be different from those of the long run. To overcome this limitation we use a sequential dynamic CGE microsimulation model that takes into account accumulation effects and makes it possible to study poverty and inequality through time. Changes in poverty are then decomposed into growth and distribution components in order to examine whether de-protection and factor accumulation are pro-poor or not. The model is applied to Senegalese data using a 1996 social accounting matrix and a 1995 survey of 3278 households. The main findings of this study are that trade liberalisation induces small increases in poverty and inequality in the short run as well as contractions in the initially protected agriculture and industrial sectors. In the long run, it enhances capital accumulation, particularly in the service and industrial sectors, and brings substantial decreases in poverty. However, a decomposition of poverty changes shows that income distribution worsens, with greater gains among urban dwellers and the non-poor.Dynamic CGE model, trade liberalisation, poverty, inequality, Senegal

Public spending composition and public sector efficiency: Implications for growth and poverty reduction in Uganda

The paper examines the interrelationships between public spending composition and Uganda's development goals including economic growth and poverty reduction. We utilize a dynamic CGE model to study these interrelationships. This paper demonstrates that public spending composition does indeed influence economic growth and poverty reduction. In particular, this study shows that improved public sector efficiency coupled with re-allocation of public expenditure away from the unproductive sectors such as public administration and security to the productive sectors including agriculture, energy, water and health leads to higher GDP growth rates and accelerates poverty reduction. Moreover, the rate of poverty is faster in rural households relative to the urban households. A major contribution of this paper is that investments in agriculture particularly with a view of promoting value addition and investing in complementary infrastructure including roads and affordable energy contributes to higher economic growth rates and also accelerates the rate of poverty reduction.Sennoga, Matovu, EPRC, Public expenditure, Economic growth - Uganda, Poverty reduction, Computable General Equilibrium, Agribusiness, Agricultural and Food Policy, Community/Rural/Urban Development, Consumer/Household Economics, Crop Production/Industries, Demand and Price Analysis, Financial Economics, Institutional and Behavioral Economics, Production Economics, Public Economics, Resource /Energy Economics and Policy, C68, D58, E62, F15, H62, 132,

Regional economic modelling: evaluating existing methods and models for constructing an Irish prototype

This paper provides an overview of competing and supplementing methodologies for modelling the regional economic dynamics. The discussion provides a primer on how regional CGE, Econometric, Input-Output and SAM based models work towards capturing the region-specific, interregional and multiregional production, consumption and factor market patterns. An analysis of virtues and limitations of these alternate methodologies suggests that it may be the considerations such as the data collection/compilation, expected output, research objectives and costs involved that may determine the choice of modelling framework. Several existing regional models constructed for other countries and their characteristics are summarized along with the specific discussion on regional economic impact analysis in Ireland and how one could move towards constructing an Irish prototype.Input Output; Social Accounting Matrix; Computable General Equilibrium (CGE) Model;

Implications of WTO agreements and unilateral trade policy reforms for poverty in Bangladesh : short versus long-run impacts

The authors examine the effects of WTO agreements and domestic trade policy reforms on production, welfare, and poverty in Bangladesh. They use a sequential dynamic computable general equilibrium (CGE) model, which takes into account accumulation effects, allowing for long-run analysis. The study is based on the 2000 Social Accounting Matrix (SAM) of Bangladesh including 15 production sectors, four factors of production (skilled and unskilled labor, agricultural and nonagricultural capital), and nine household groups (five in rural areas and four in urban areas). To examine the link between the macroeconomic effects and microeconomic effects in terms of poverty, the authors use the representative household approach with actual intra-group income distributions. The study presents five simulations for which the major findings are: (1) The Doha scenario has negative implications for the overall macroeconomy, household welfare, and poverty in Bangladesh. Terms of trade deteriorate and consumer prices, particularly food prices, increase more than nominal incomes, especially among poor households. (2) Free world trade has similar, but larger, impacts. (3) Domestic trade liberalization induces an expansion of agricultural and light manufacturing sectors, favorable changes in the domestic terms of trade. Although the short-run welfare and poverty impacts are negative, these turn positive in the long run when capital has adjusted through new investments. Rising unskilled wage rates make the poorest households the biggest winners in terms of welfare and poverty reduction. (4) Domestic liberalization effects far outweigh those of free world trade when these scenarios are combined. (5) Remittances constitute a powerful poverty-reducing tool given their greater importance in the income of the poor.Economic Theory&Research,Rural Poverty Reduction,Free Trade,Markets and Market Access

Poverty Analysis Within a General Equilibrium Framework

The main objective of this paper is to show how Social Accounting Matrices (SAM) and Computable General Equilibrium (CGE) Models can be used to highlight and address issues related to income distribution and poverty. The paper is divided into two major parts. Part 1 presents the concept of the SAM as a comprehensive, consistent and disaggregated data system and shows how the SAM methodology can be used to analyze issues related to income distribution and, in a much more limited way, poverty. Part 2 is devoted to the presentation of a CGE model calibrated on an archetype African SAM (same as above). One innovation in the specification of the present CGE is that it goes part way in endogenizing the poverty line and the resulting poverty incidence among the different socioeconomic household groups and representing income distribution with a flexible Beta distribution function and using the F-G-T additively decomposable class of poverty measures. The model is used to simulate the impact of two exogenous shocks (a fall in the price of the export crop and an import tariff reform) specifically on poverty.Poverty, Computable General Equilibrium Model, Input Output Models

Poverty and inequality effects of a high growth scenario in South Africa: A dynamic microsimulation CGE analysis

The debate about the consequences of economic growth on poverty and welfare was recently rekindled in South Africa by announcements that the government would be targeting a sustainable growth rate of 6 percent per annum under the Accelerated and Shared Growth Initiative for South Africa (ASGISA). This paper uses a sequential dynamic computable general equilibrium model linked to a nationally representative household survey to assess the poverty and economic consequences of a higher economic growth scenario. The main findings are that higher economic growth induces reductions in poverty both in the short and long run. It enhances capital accumulation, particularly in the agriculture and textiles sectors. An interesting observation is that the Mining industry benefits the least from a high economic growth scenario. However, this is not related to domestic savings/investment. Mining is strongly dependent on foreign investments and the industry return to capital is less profitable to domestic institutions, particularly households and this is what explains the lower benefits to the sector. African and Coloured households reap most of the benefits, with greater gains among urban unskilled dwellers. These findings suggest that lifting of growth constraints rather than macroeconomic stimulation would induce higher growth with the resulting beneficial effects. Economic growth of the levels simulated does not appear to be inconsistent with macroeconomic balance, as reflected in price stability, balance of payments and sectoral effects.Sequential dynamic CGE, microsimulation, ASGISA, poverty, welfare, growth, South Africa

Implications of WTO Agreements and Domestic Trade Policy Reforms for Poverty in Bangladesh: Short vs. Long Run

We examine the impacts of WTO agreements and domestic trade policy reforms on production, welfare and poverty in Bangladesh. A sequential dynamic computable general equilibrium (CGE) model, which takes into account accumulation effects, is used allowing for long run analysis. The study is based on 2000 SAM of Bangladesh including fifteen production sectors, four factors of production (skilled and unskilled labour, agricultural and non-agricultural capital) and mine household groups (five in rural areas and four in urban areas) based on the year 2000 household survey. To examine the link between the macro effects and micro effects in terms of poverty we use the representative household approach with actual intra-group income distributions. The study presents five simulations for which the major findings are: (1) the Doha scenario has negative implications for the overall macro economy, household welfare and poverty in Bangladesh. Terms of trade deteriorate and consumer prices, particularly food prices, increase more than nominal incomes, especially among poor households; (2) Free world trade has similar, but larger, impacts; (3) Domestic trade liberalisation induces an expansion of agricultural and light manufacturing sectors, favourable changes in the domestic terms of trade. Although the short run welfare and poverty impacts are negative, these turn positive in the long run when capital has adjusted through new investments. Rising unskilled wage rates make the poorest household the biggest winners in terms of welfare and poverty reduction; (4) Domestic liberalisation effects far outweigh those of free world trade when these scenarios are combined; (5) Remittances constitute a powerful poverty-reducing tool given their greater importance in the income of the poor.Dynamic CGE model, International trade, Poverty, Bangladesh