Shiro Takeda

A Computable General Equilibrium Analysis Of Border Adjustments Under The Cap-And-Trade System: A Case Study Of The Japanese Economy

Using a multi-region and multi-sector computable general equilibrium model, this paper evaluates the border adjustment policies of carbon regulations in Japan. We consider five types of border adjustments and examine their effects on the welfare, carbon leakage, and competitiveness of the Japanese energy-intensive trade-exposed (EITE) sectors.Our analysis shows that no single border adjustment policy is superior to the other policies in terms of simultaneously solving three primary issues: Welfare degradation, carbon leakage, and a loss of competitiveness in the EITE sectors. In addition, we show that export border adjustments are effective at restoring the competitiveness of Japanese exporters and reducing leakage. Our analysis also reveals that border adjustment in Japan significantly affects carbon leakage to China and the competitiveness of the iron and steel sectors. Finally, we show that border adjustments with and without consideration of indirect emissions have similar impacts, which indicates that the information regarding direct emissions is sufficient for implementing border adjustment in Japan.

A computable general equilibrium analysis of the welfare effects of trade liberalization under different market structures

Using a static world computable general equilibrium model with 16 sectors and 14 regions, this paper compares welfare effects of trade liberalization of the perfectly competitive model and eight imperfectly competitive models. Our main findings are as follows. First, the size of the welfare impact systematically depends on the type of model. Second, the welfare impact of the perfectly competitive model is not necessarily smaller than those of imperfectly competitive models. Third, the integrated market model tends to have a larger welfare impact than the segmented market model. Fourth, the model with the fixed number of firms tends to have a small welfare impact. Finally, the variety effect tends to have a stronger influence on the welfare effects of liberalization than do scale and markup effects. Differences in the models can be viewed as differences in the economic structures of the regions being analyzed, and therefore the analysis in this paper makes it possible to derive policy implications with regard to the relationship between economic structure and trade liberalization.

A CGE Analysis of Border Adjustments Under the Cap-and-Trade System: A Case Study of the Japanese Economy

Using a multi-region and multi-sector CGE model, this paper evaluates the impact of border adjustment policies of carbon regulations on the Japanese economy. We consider the following six scenarios: 1) no border adjustment, 2) carbon tariffs on imports based on the carbon content in foreign exporters’ production, 3) carbon tariffs on imports based on the carbon content in domestic production (BID), 4) carbon tariffs on imports and rebates on exports based on the carbon content in domestic production (BIED), 5) BID applied only to the EITE (energy-intensive trade-exposed) sectors, and 6) BIED applied only to the EITE sectors. In particular, we examine the impact of the border adjustment policies on the welfare of the Japanese economy, carbon leakage, and the competitiveness of the Japanese EITE sectors.Our analysis shows that no single border adjustment policy is superior to the other policies in terms of simultaneously solving all three issues: welfare impacts, carbon leakage, and the loss of competitiveness in the EITE sectors. In addition, we show that export border adjustment often plays a crucial role in Japan. This insight is interesting because the policy debate on border adjustment is often biased toward import border adjustment. Our analysis also reveals that border adjustment in Japan significantly affects carbon leakage to China and the competitiveness of the iron and steel sector. Finally, we show that border adjustments with and without consideration to indirect emissions have similar impacts, which indicates that the information regarding direct emissions is enough to implement border adjustment in Japan.

Regional Effects of Trade Liberalization in Japan: A CGE Analysis Based on an Interregional Input-Output Table

Since the 1990s, computable general equilibrium (CGE) analysis has been widely used as a tool for evaluating the quantitative effects of trade policy, and many CGE studies have concerned trade liberalization in Japan. However, no study has attempted to examine the regional effects of liberalization; that is, how trade liberalization affects individual Japanese regions. Given that trade liberalization is likely to generate dissimilar effects in different regions, and because concern with regional disparities has grown, it is of great importance to analyze the regional effects of trade liberalization. Using a bottom-up regional CGE model, this paper quantitatively evaluates the regional effects of trade liberalization in Japan. We use a static single-country model with 23 sectors and 8 domestic regions and the Interregional Input.Output Table for Japan 2000 as the benchmark data. The main results are as follows. First, trade liberalization increases welfare and GDP in Japan as a whole. This finding is consistent with previous studies in this area. Second, the magnitude of the GDP and welfare effects differs significantly across regions. In particular, high-income regions like Kanto, Chubu and Kinki have large gains while low-income regions like Hokkaido, Tohoku and Kyushu-Okinawa have small (or negative) gains. That is, trade liberalization exacerbates existing regional disparities. These results indicate that if policy makers have an interest in regional disparity, they should implement some form of redistributive policy in conjunction with trade liberalization.

Comparison of the Effects of Trade Liberalization Under Different Market Structures

Using a static world CGE model, this paper compares welfare and output effects of trade liberalization of a perfectly competitive model and eight imperfectly competitive models in a unified framework. Our main finding is that welfare effects are generally robust to the model choice whereas output effects in some sectors drastically vary according to the model choice. Although there are a large number of CGE studies that try to analyze effects of trade liberalization on output, our analysis demonstrates that results derived from a specific model can be misleading.

Effects of Immigration in Japan: A Computable General Equilibrium Assessment

Due to an aging population and falling birthrates, the labor force in Japan will continue to decline in the next decades, and per capita income is also likely to decrease. To address this problem, the Japanese government is considering relaxing restrictions on foreign labor, and there have been debates regarding accepting foreign workers in Japan. Current Japanese law imposes strong restrictions on unskilled foreign labor; thus, relaxing these restrictions will lead to an inflow of unskilled foreign workers into Japan. However, few studies have analyzed the possible quantitative effects of such measures. Using a simulation based on a computable general equilibrium model, this paper analyzes the quantitative impacts of the foreign labor inflow on the Japanese economy. Our model is a recursive dynamic model from 2010 to 2030 with 32 sectors. We categorize labor into the following two types: skilled and unskilled. In the main scenario, we assume an inflow of 5.32 million unskilled foreign workers, which is equal to half of the labor force decrease in Japan. The results of the main scenario are summarized as follows. First, foreign labor inflow lowers the wage rate of unskilled labor but raises that of skilled labor and the rental price of capital. Second, the inflow increases the GDP, income, and consumption, but the increases in income and consumption are very small compared to the increase in GDP. Third, the inflow has very different impacts on the different sectors. Fourth, we show that a policy limiting the sectors that accept foreign labor does not necessarily increase the output of these sectors. Finally, we show that if we accept not only unskilled but also skilled labor, the impacts on wage rates change significantly.