Roy Boyd

The linkage between oil price shocks and economic growth with inflation in the presence of technological advances: a CGE model

Abstract This study examines whether oil price shocks are inflationary in the US. We increase the price of oil in the year 2000 in a manner consistent with the oil price shock of 1973–74 and let the economy experience a Hicksian technological change. Then using a dynamic computable general equilibrium (CGE) model, we conduct our analyses under two separate cases: (1) regular economic growth, and (2) low economic growth. We also run three technological scenarios: (1) no technology change, (2) technological advances in the manufacturing and refining sectors, and (3) technological advances in the manufacturing, refining, chemical, and service sectors. The effects of these changes are analyzed over the next 20 years until the year 2020. Our results suggest that while a shock of the magnitude experienced in the 1970s will have a fairly severe effect on such things as gasoline and refinery prices, the aggregate price changes will be largely dissipated over time at the aggregate level. Furthermore, the aggregate level of prices (CPI and PPI) will fall over time as the level of technological advances rise under both growth scenarios. There are several reasons why we would obtain such results. First of all, the structure of the US economy has changed remarkably since the early 1970s. Rather than being a manufacturing based economy, the US is largely a service based economy today and hence it is more protected form raw materials shortages. Second, the economy has had a steady history of strong growth and the faster an economy grows the quicker disruptions to that economy are dissipated. Finally, our economy is experiencing rapid technological advances in information systems which have served to reduce costs and maintain output in a wide number of economic sectors.

Extreme climate events and adaptation: an exploratory analysis of drought in Mexico.

Climate change is increasing the intensity of extreme weather events. Mexico is particularly prone to suffer at least two different types of these events: droughts and hurricanes. This paper focuses on the effects of an extended drought on the Mexican economy. Through a computable general equilibrium model, we simulate the impact of a drought that affects primarily agriculture, livestock, forestry, and hydropower generation. We look at the effects on the overall economy. We then simulate the effects of several adaptation strategies in (chiefly) the agricultural, forestry, and power sectors, and we arrive at some tentative yet significant conclusions. We find that the effects of such an event vary substantially by sector with moderate to severe overall impacts. Furthermore, we find that adaptation policies can only effect modest changes to the economic losses to be suffered.

The J-curve effect and US agricultural and industrial trade

This paper examines the J-curve hypothesis for US agricultural and manufactured goods, using the Shiller lag model. The results support the J-curve effect for agricultural goods, but not for manufactured goods. These findings explain why many studies in the literature fail to support the J-curve phenomenon. There are two explanations for these findings: (1) the aggregation bias of data that combine both agricultural and manufactured goods and (2) the country under study is often an industrial nation like the US or Japan with a high proportion of manufactured goods in both exports and imports.

The Welfare Impacts of U.S. Trade Restrictions against the Canadia n Softwood Lumber Industry: A Spatial Equilibrium Analysis

In this paper the authors estimate the production and welfare impacts of various U.S. trade restrictions on Canadian lumber. After building a model which incorporates the regional character of the North American lumber market, the authors simulate a variety of tariffs and quotas now advocated by a number of U.S. lawmakers. They find that the tariff losses incurred by Canadian producers could be substantial, depending on the elasticity of their export supply. Voluntary restraint agreements, however, might lead to Canadian gains as high as 40 percent of their preexisting profits.

The stability of cigarette demand

The relative effects of various governmental interventions upon cigarette consumption is important to policy-makers. Historically, the demand for cigarettes has been quite unstable. Previous studies employ fixed parameter models and use dummy variables associated with interventions to stabilize the demand function. In contrast, we use a varying parameter model aplied to data from the United States for 1953–84 to investigate the stability of demand and show that the demand function is stabilized when dummy variables are employed. Our results suggest that industry advertising increases aggregate consumption while government interventions decrease it. However, the marginal effect of government warnings seems to be small, at least in the US: while the effect of the 1964 health warning is statistically significant, the effect of the 1979 health warning is not.

The fleeting effect of advertising: Empirical evidence from a case study☆

Abstract This paper adds to the evidence that advertising effects depreciate rapidly. Inclusion of lagged advertising in empirical models may be unnecessary. In addition, the notion that accumulated advertising effects may be a barrier to entry is called into question.

The Value of Changes in Deer Season Length: An Application of the Nested Multinomial Logit Model

Increasing deer populations can be controlled through manipulatingharvest limits or season length. While such actions often result in benefitsto hunters, both motorists and the agricultural sector also benefit as alower deer population leads to fewer incidences of harmful human-deerencounters. Traditional recreation demand models are often employed toexamine the welfare implications of changes in daily hunting bag limits.Studies measuring the effects of changes in season length, however, arenoticeably absent from the literature. This study uses a nested randomutility model to examine hunter choice over site and season selection toderive the values of changes in season length.

Costs of compliance with the Kyoto Protocol: a developing country perspective

Abstract Mexico is currently the 15th largest emitter in the world of greenhouse gases and by far the largest source of such emissions in Latin America. Thus, from a strategic standpoint, Mexicos decision to abide or not by carbon emission restrictions in the future is a matter of relative significance. Mexico has found itself under intense pressure to join with the worlds industrialized economies and develop a plan for limiting its use of carbon-based energy sources in the future. Such a plan would, of course, entail economic costs and could significantly limit future growth, investment, and consumer welfare. A carbon tax may reduce the growth rate of carbon emissions as well as impose constraints on sector-related and overall economic growth. Nonetheless, it has a progressive effect on welfare levels in all simulations, meaning that it benefits (or harms less) the groups with lower income levels. On the other hand, a Double Dividend is very unlikely to result from this policy. Only under significantly high rates of technological change in the Mexican economy, namely of 5–6%, can a reduction in the rate of growth of carbon emissions and an increase in welfare be attained for all income groups simultaneously. At the same time, high rates of technological change increase production and therefore emissions. Overall, there are strong benefits from the application of this policy in that it reduces the growth rate of carbon emissions. This exercise is a first approach to the application of an ample environmental tax to a developing country and results show that a favorable outcome may be expected. However, estimating the costs of practical policies to make investment in energy-saving technological change attractive to producers has yet to be addressed.

An evaluation of the economic effects of higher energy prices in Mexico

Abstract The analysis of this study examines the impact of an increase in the prices of gasoline and electricity on the Mexican economy. The analytical approach used consists of a general equilibrium model composed of 13 producing sectors, 14 consuming sectors, 4 household categories classified by income and one government. The effects of the recently implemented increase in the price of gasoline and electricity of 26.2% on prices and quantities are examined. The results are revealing. For example, the consequences of an increase in the prices of gasoline and electricity would be a decrease in output by all producing sectors of about 0.31%, a fall in the consumption of goods and services by about 0.56%, a reduction in total utility by 1.29% and higher revenue for the government of 0.31%. When subjected to a sensitivity analysis, the results are reasonably robust with regard to the assumption of the values of the substitution elasticities.

Tax Reform and Land-Using Sectors in the U.S. Economy: A General Equilibrium Analysis

A computable general equilibrium model of the U.S. economy is used to assess the effects of the Tax Reform Act of 1986 on land-using sectors (forestry and three classes of agriculture). The models components include twelve production sectors, six consumer groups, a balanced-budget government sector, and a zero surplus foreign sector. In relative terms, Tax Reform reduces total value added output in land-using sectors to a greater extent than other sectors in the economy. Experiments are also performed comparing partial and general equilibrium specifications of the economy and the impact of choice of input substitution elasticities.