General Equilibrium Analysis of Regional Redistributive Effects of Investment for Reconstruction from the Great East Japan Earthquake

By focusing on the impacts of investment in the disaster areas for reconstruction on the demand-side effects, the purpose of this study is to measure the economic impacts and regional spillover effects of investment for reconstruction. After the Great East Japan Earthquake of 2011, government investment in the disaster stricken areas was provided for reconstruction of capital stock damaged, and dynamic analysis is needed to reveal the long-term effects of investment. On the other hand, government investment for reconstruction results in increased aggregate demand, gross income, and gross production in the disaster areas, and has spillover effects on the other prefectures except for the disaster areas, even if the amount of damaged capital stock is given. This study develops a spatial computable general equilibrium (SCGE) model that consists of 47 prefectures and 20 industrial sectors in Japan. Also, this study assumes two scenarios. First, in order to measure economic damages in Japan, this study assumes a supply constraint by collapsed private capital stocks in the disaster areas (Iwate, Miyagi, Fukushima and Ibaraki). Second, in order to measure regional redistributive impacts of reconstruction investment, this study assumes that a reconstruction investment that evenly distributes funds to the disaster areas. The findings in this study are shown below. 1) By collapsed private capital stocks due to the earthquake, real GDP was estimated to decrease in 124 trillion dollars per year in total and to decrease in 120 trillion dollars per year in total in the disaster areas before the earthquake. Also, welfare was estimated to decrease in 109 trillion dollars per year in total and to decrease in 86 trillion dollars per year in total in the disaster areas. 2) After the earthquake, since investment for reconstruction improved real GDP and welfare in the disaster areas, this study showed that reconstruction investment contributed significantly to economic recovery in the disaster areas. By reconstruction investment, real GDP was estimated to increase in 1.6 trillion dollars per year in total and to increase in 56.7 trillion dollars per year in total in the disaster areas after the earthquake. Also, welfare was estimated to increase in 360 trillion dollars per year in total and to increase in 121 trillion dollars per year in total in the disaster areas. 3) Since investment for reconstruction resulted in welfare increase in 239 trillion dollars per year in total in regions except for the disaster areas, this study showed regional redistributive effect of reconstruction investment. The reason for this effect is that reconstruction investment in the disaster areas increases in demand in regions except for the disaster areas

General Equilibrium Approach consistent with Travel Cost Method for Economic Evaluation of Beach Erosion by Climate Change

Numerous attempts have been made to evaluate economic impacts by climate change, and the evaluation method can be classified into two approaches. One is a partial equilibrium approach and the other is a general equilibrium approach. The former method includes a travel cost method (TCM) and a contingent valuation method. These methods have applied in some studies to quantify economic value of environmental quality. The partial equilibrium approaches for each case, however, cannot capture economic impacts of changes in natural environment by climate change and environmental conservation policies. On the other hand, the latter method has a computable general equilibrium (CGE) analysis. As a CGE model treats all markets in the economy, both direct and indirect impacts of climate change through changes in the behavior of economic agents can be captured. A CGE model, however, needs the formulation of impacts on environmental quality and the estimation of their parameters in this model. As mentioned above, considerable studies on economic evaluation of climate change have separately analyzed by two approaches. Therefore, by explicit linkage between a partial equilibrium approach and a general equilibrium approach, comprehensive assessments in a general equilibrium framework are needed. To measure economic impacts of the changes in environmental quality by climate change, this study develops a theoretical framework of a CGE model that integrates the utility function that has environmental quality as the independent variable derived from a recreation demand function in a TCM, and confirms the validity of our CGE model through some numerical experiments using the beach erosion scenarios. The findings in this study are shown below. 1) By solving the integrability problem, we derived the utility function that has composite goods, visit frequency to recreation sites and environmental quality in the site as the independent variable from the estimation of a recreation demand function in a TCM, and developed the theoretical framework of a CGE model consistent with the utility function derived in this study. 2) Through some numerical experiments by the beach erosion scenarios, we revealed that our CGE model can evaluate the changes in price and income that are not taken into account in the definition of the consumer surplus derived from the partial equilibrium approach. 3) By testing the economic validity of numerically experimental results, we demonstrated that our CGE model is applicable for empirical analysis of climate change

Measurement of use value and non-use value of environmental quality consistent with general equilibrium approach

This paper proposes the consistent method with general equilibrium models to measure use value and non-use value of large-scale change in environmental quality. First, we develop a general equilibrium model that parameters of the utility function with environmental quality as a dependent variable can be estimated on the basis of the travel cost method and the contingent variation method. Second, we examine to identify the general equilibrium impact of environmental quality by a comparative static analysis. Third, considering change in prices and income, we decompose the benefits from change in environmental quality into use value and non-use value

Upper tail large deviation for the one-dimensional frog model

In this paper, we study the upper tail large deviation for the one-dimensional frog model. In this model, sleeping and active frogs are assigned to vertices on $\mathbb Z$. While sleeping frogs do not move, the active ones move as independent simple random walks and activate any sleeping frogs. The main object of interest in this model is the asymptotic behavior of the first passage time ${\rm T}(0,n)$, which is the time needed to activate the frog at the vertex $n$, assuming there is only one active frog at $0$ at the beginning. While the law of large numbers and central limit theorems have been well established, the intricacies of large deviations remain elusive. Using renewal theory, B\'erard and Ram\'irez have pointed out a slowdown phenomenon where the probability that the first passage time ${\rm T}(0,n)$ is significantly larger than its expectation decays sub-exponentially and lies between $\exp(-n^{1/2+o(1)})$ and $\exp(-n^{1/3+o(1)})$. In this article, using a novel covering process approach, we confirm that $1/2$ is the correct exponent, i.e., the rate of upper large deviations is given by $n^{1/2}$. Moreover, we obtain an explicit rate function that is characterized by properties of Brownian motion and is strictly concave.Comment: 48 pages, 1 figur

Measurement of flood damage due to climate change by dynamic spatial computable general equilibrium model

To explain economic impacts of flood damage due to climate change over time in Japan, this study develops a dynamic spatial computable general equilibrium model, and measures flood damage costs through some numerical experiments. It is inferred that the frequency and the intensity of flood are on the long-term increase. In the category of flood damage in Japan, there are serious flood damages to social capitals. These observations are described in statistical research on flood by Japanese government. In this study, these damages are defined as gthe direct damageh, and are different from decrease in equivalent consumption due to the direct effect. Also, the proportion of the direct damage to decrease in equivalent consumption is defined as gthe dynamic multiplier of damage costh. This study develops a spatial CGE model based on dynamic structure of the Ramsey model. Our model has 8 regions and 20 production sectors. The flood scenario is described as increase in capital depreciation rate due to flood from 2000 to 2050. In our simulations, 5 flood damage rates are used consisting of damage rates calculating by 4 climate models and uniform damage rate throughout Japan. To consider dynamic spillover effects of flood damage, this study proposes two indices as dynamic damage costs that are comparative static and transition dynamics. The former is the long-term damage caused as the result of shifts from a steady-state equilibrium to another by increasing in the frequency and the intensity of flood due to climate change. On the other hand, the latter is the difference between flood damage costs by a baseline scenario and by a flood scenario, on the transition path to a new steady-state equilibrium. As the transition path can be described, this study shows possible dynamic spillover effects of flood damage over time. The findings in this study are shown below. 1)In 2050, the total amount of flood damage cost is estimated to be from about US$0.4 billion to about US$5.6 billion. 2)The decrease in the rate of investment return by the long-term increase in flood damage causes decrease in savings and consumption, so that the dynamic multiplier of damage cost is estimated to be from 1.2 to 1.7 times