Manuel Alejandro Cardenete

AN APPLIED GENERAL EQUILIBRIUM MODEL TO ASSESS THE IMPACT OF NATIONAL TAX CHANGES ON A REGIONAL ECONOMY

This paper presents two versions of an applied general equilibrium model for the regional economy of Andalusia, Spain, that differ in the Public Sector behavior. We intend to exemplify the use of a model with these characteristics to analyze the impact that the reform of the personal income tax (Act 40/98) implemented in Spain as a whole would have had on the Andalusian region in particular. Such an important tax reform is bound to affect the behavior of the agents in this economy, both in the microeconomic and the derived macroeconomic spheres. The general character of the tax reform under analysis and the relations among the different economic agents advise us to use models with these characteristics to study the effects of this reform. The models is of the neoclassical variety and include not only the productive sectors of the economy but also the foreign sector and the government, which are usually absent from theoretical general equilibrium models. Both versions of the model are calibrated by using a Social Accounting Matrix of Andalusia for 1995.

Performing an Environmental Tax Reform in a Regional Economy. A Computable General Equilibrium Approach

We use a Computable General Equilibrium model to simulate the effects of an Environmental Tax Reform in a regional economy (Andalusia, Spain). The reform involves imposing a tax on CO2 or SO2 emissions and reducing either the Income Tax or the payroll tax of employers to Social Security, and eventually keeping public deficit unchanged. This approach enables us to test the so-called double dividend hypothesis, which states that this kind of reform is likely to improve both environmental and non-environmental welfare. In the economy under analysis, an employment double dividend arises when the payroll tax is reduced and, if CO2 emissions are selected as environmental target, a (limited) strong double could also be obtained. No double dividend appears when Income Tax is reduced to compensate the environmental ta

Using compromise programming for macroeconomic policy making in a general equilibrium framework: theory and application to the Spanish economy

This paper aims to show how Compromise Programming, linked with some results connecting this approach with classic utility optimization, can become a useful analytical tool for designing and assessing macroeconomic policies. The functioning of the method is illustrated through an application to the Spanish economy. In this way, starting from a Computable General Equilibrium Model, a frontier of growth–inflation combinations is determined. After that, several Pareto-efficient policies that represent compromises between economic growth and inflation rate are established and interpreted in economic terms.

The Impact of European Structural Funds in the South of Spain

Over the last decades, the European Union has contributed to the development of poor regions of the Associate Members. This is the case of Andalusia, an Objective 1 region for the European regional policy in the south of Spain. In this paper we carry out an impact analysis of the European Regional Development Fund (ERDF), one of the most important Structural Funds, to the object of assessing its effect on aggregate and sectoral production, price indexes and consumers’ welfare. To this extend we compute an Applied General Equilibrium Model (AGEM) and we present a counterfactual analysis with simulations for three representative years: 1990, 1995 and 1999. We conclude that regional funding has deeply contributed to Andalusian regional development and the effectiveness of the funds seems to be larger for the last years of the study.

Applied General Equilibrium: An Introduction

Foreword.- 1 Introduction.- 2 An Overview of General Equilibrium Theory.- 3 A simple General Equilibrium Model.- 4 A General Equilibrium Model with a Government Sector.- 5 Further Extension of the Model: External Sector, Labor Market and Consumption Technology.- 6 Data Base and Model Calibration.- 7 Real-World Examples of Applied General Equilibrium Analysis.- Index.

The Role of Supply Constraints in Multiplier Analysis

Multiplier analysis based upon the information contained in Leontiefs inverse is undoubtedly part of the core of the input–output methodology and numerous applications and extensions have been developed that exploit its informational content, both at the national and regional levels. Nonetheless there are some implicit theoretical assumptions whose policy implications need to be assessed. This is the case for the ‘excess capacity’ assumption, which implies that resources are available as needed to adjust production to new equilibrium states. In an actual economy, however, new resources are often scarce and always costly. When supply constraints intervene, the assessment of the effects of government demand policies may be substantially different from that of the standard Leontief multiplier matrix. Using a closed general equilibrium model that incorporates supply constraints, we perform some simple numerical exercises and proceed to derive two ‘constrained’ multiplier matrices, based upon the implicit Jacobian matrix, that can be compared with the standard ‘unconstrained’ Leontief matrix.

Ex-ante analysis of the regional impacts of the common agricultural policy:a rural-urban recursive dynamic CGE model approach

Abstract A recursive dynamic regional Computable General Equilibrium model is developed to assess the economic impacts of two Common Agricultural Policy (CAP) scenarios in six NUTS-3 (Nomenclature of Territorial Units for Statistics) (NUTS-1: major socio-economic regions, NUTS-2: basic regions for the application of regional policies, NUTS-3: small regions for specific diagnoses) regions of the European Union (EU). The main goal of the analysis is to assess the scenario effects (change in production, prices, income, employment) in the rural and urban parts of these regions as well as on the different sectors. The two scenarios analysed are related to a 30% reduction in Pillar 1 (market measures and direct support to farmers) support and the introduction of an EU-wide flat rate level of Pillar 1 support complemented by a 45% increase in Pillar 2 (Rural Development Policy) funds. Results show that the overall gross domestic product effects are not significant, due to the relatively low importance of both the agricultural sector and CAP spending in the regional economies. However, impacts on the agricultural sector are quite important and differ according to the nature of the policy shock. Also, the structural characteristics of each case study influence the rural–urban and sectoral spillovers, including impacts on region-specific agricultural activity.

Reverse impact assessment using a regional social accounting matrix

Unlike traditional impact analysis, that measures the influence of a sector, or a set of like sectors, on the overall economy, we present in this note a simple reverse procedure that attempts to quantify the impact of activity changes in the overall regional economy over a specific subset of firms. We apply the procedure to a specific enclave of the chemical and basic industry sectors, which has been and still is of special significance for the development of the region. Because we feel that interdependency effects should be adequately captured, we rely on a 1995 regional social accounting matrix (SAM) of Andalusia, Spain, to establish the empirical structural support for the analysis. We proceed by setting up a linear SAM model to obtain extended multipliers, then we decompose them in three categories of effects (direct, indirect, and induced) under different hypotheses about the classification of endogenous and exogenous sectors. The decomposed multipliers are then apportioned to measure and distinguish the effects on the economic enclave. The results are seen to be quite robust to the exogeneity assumptions.

Economic impact assessment of small-scale sporting events using Social Accounting Matrices: an application to the Spanish Football League

ABSTRACT Small-scale sporting events contribute to hosting economies through the expenditures of both sports team activities and sports tourism. Among these sports, football has an increasing importance worldwide, with outstanding competition, such as the Spanish Football League. The goal of this paper was to assess the impact of a team’s promotion on the hosting economy by using linear models based on regionalized Social Accounting Matrices (SAMs). The proposed methodology is applied to the real case of the promotion of the Spanish team Cordoba F.C. over the 2014–2015 season. Estimates are made under two scenarios, conservative and progressive, encompassing different rates of both attendance and average expenditure per spectator and per match. The results highlight that the net expenditures associated with small-scale sporting events benefit the hosting economy, spurring the production of goods and services directly demanded as well as the production of supplier activities.

Taxing electricity consumption in Spain: evidence to design the post-Kyoto world

ABSTRACTDue to the relevance of fossil fuels in the electricity matrix in Spain, the electrical sector plays a crucial role in mitigation policies such as carbon taxes. Increased prices of electricity can act as an incentive to enhance energy efficiency contributing to CO2 abatement. This paper evaluates a tax on electricity consumption (ECT). Focusing on energy efficiency commitments for Spain as established by EU Authorities for Horizon 2020 (H2020), a pricing model was created to assess economic impacts and its effectiveness in meeting this commitment. The analysis was performed by considering two scenarios, without (Scenario 1) and with (Scenario 2) tax recycling between the new tax and employer-paid social security benefits or contributing to price stability. In Scenario 2, the tax reform is achieved with tax recycling, offsetting the introduction of the ECT by reducing employer-paid social security payments. Two alternative restrictions on the tax reform were considered for the simulation of Scenari...ABSTRACT Due to the relevance of fossil fuels in the electricity matrix in Spain, the electrical sector plays a crucial role in mitigation policies such as carbon taxes. Increased prices of electricity can act as an incentive to enhance energy efficiency contributing to CO2 abatement. This paper evaluates a tax on electricity consumption (ECT). Focusing on energy efficiency commitments for Spain as established by EU Authorities for Horizon 2020 (H2020), a pricing model was created to assess economic impacts and its effectiveness in meeting this commitment. The analysis was performed by considering two scenarios, without (Scenario 1) and with (Scenario 2) tax recycling between the new tax and employer-paid social security benefits or contributing to price stability. In Scenario 2, the tax reform is achieved with tax recycling, offsetting the introduction of the ECT by reducing employer-paid social security payments. Two alternative restrictions on the tax reform were considered for the simulation of Scenario 2. In the first case, a restriction was imposed to ensure revenue neutrality (2-I). In the second case, the restriction ought to maintain price stability (2-II). Results from different scenarios offer an important range of possibilities for policy decisions. The results show that with a tax rate equal to 1%, there is a remarkable reduction of CO2 emissions from the electricity sector, and the same happens with other sectors that the literature identifies as drivers of such emissions.