A sub-national CGE model for Italy

Transcription

1

2

3 A sub-national CGE model fo Italy Gabiele Standadi a,b Faneso Bosello a,b, Fabio Eboli a,b Abstat This pape desibes a methodology to develop a Computable Geneal Equilibium model with a subnational detail stating fom a global database and model pesenting the ounty-level as the highest esolution. This poedue is demonstatively applied to Italy, but an be tansfeed to any ounty/maoegion, povided egional data availability. Ineasing the spatial esolution of a CGE model an be patiulaly useful to aptue loal speifiities not only in esponse to given poliy shoks, but also to envionmental impats, as, fo instane, those oiginated by limate hange, whih ae highly diffeentiated spatially. Coneptual and patial issues ae teated: we use an innovative method to estimate bilateal tade flows aoss sub-national aeas and analyse the impliations of diffeent assumptions on both fato and good inta-ounty mobility. We ay out a simple expeiment to test the obustness of ou egionalized stutue. Key Wods: CGE models, Regional eonomis JEL CODE: C68, D58, R11, R12, R13 a CMCC EuoMediteanean Cente on Climate Change b FEEM Fondazione Eni Enio Mattei Univesity of Milan Coesponding autho: gabiele.standadi@feem.it 1

4 Summay 1. Intodution Database development Splitting the podution side Estimation of tade flows aoss sub-national egions Changes in the model stutue Mobility in fatos maket The tade stutue aoss sub-national egions Testing the model Model ompaison Sensitivity analysis Conlusions and futhe eseah Aknowledgments Refeenes

5 1. Intodution Computable Geneal Equilibium models tanslate the Walasian geneal equilibium paadigm fom theoy into an opeational desiption of eal-life eonomies (Shoven and Walley, 1992). Ove the yeas thei use spead apidly aoss the aademia, intenational and national institutions. Indeed with thei expliit epesentation of intenational and intesetoal tade-flows they ae patiulaly suited to addess poliy elevant fats like tax efoms (see e.g. Shoven and Whalley, 1984; Bovenbeg, 1987; Powell and Snape, 1993; Jogenson, 1997; Dixon, 2001;), tade libealization (see e.g. Andeson et al., 2005a; Andeson et al., 2005b; Bouet et al., 2005; Fançois et al, 1995; Haison et al., 1997; Hetel and Keeney, 2005), implementation of abon and enegy taxes fo envionmental puposes (see e.g. EC 2008; EC 2010; Böhinge et al., 2009, 2010, 2012). Reently, they have been ineasingly applied to the study of eonomi onsequenes of limate hange impats (see e.g. Dawin and Tol, 2001; Bigano et al., 2008; Aaheim et al., 2010; Eboli et al., 2010; Cisa et al., 2011; Bosello et al., 2012) The typial investigation unit of CGE models is the ounty, whose eonomi system is epesented as a set of inteating setos o industies. Sub national diffeenes ae usually ovelooked. Nevetheless, moe ule than exeption, ounties pesent huge soial-eonomi diffeenes aoss thei administative units. It is thus easonable to assume that eah an be affeted quite diffeently by a given poliy shok. At the same time, thee ae also situations in whih diffeent aeas of a ounty ae hit by diffeent shoks. This is fo instane the ase of limate hange impats, that an be highly diffeentiated geogaphially. Taing these sub national effets is thus patiulaly impotant not only to gain a bette gasp of the distibutional impliation of a given poliy o impat, but also to get a moe ealisti estimation of the aggegate effet at the ounty level. In fat, speifiities and inteations aoss sub national entities ould be non-neutal in its detemination. One inteesting extension of CGE models is thus thei development into sub-national vesions. Nonetheless, few suh CGE models exist. This is mainly due to the diffiulty to eate mutually onsistent soial aounting maties fo a lage numbe of sub-national egions. Among these: Pete et al. (1996) developed the MRF (Multi Regional Foeasting) model to simulate tax/envionmental poliy fo the Austalian eonomy; Jean and Labode (2004) developed the DREAM-MIRAGE (Deep Regional Eonomi Analysis Model Modelling Intenational Relationships in Applied Geneal Equilibium) model fo Euope taking into aount 119 NUTS (Nomenlatue of Teitoial Units fo Statistis) 1 egions; Canning and Tsigas (2000) built a model fo eight mao-egions of the USA. Futhemoe, some CGE models exist pesenting a spatially esolved desiption of the agiultual seto. Examples of this type ae CAPRI-GTAP (Common Agiultual Poliy Regional Impat Analysis Global Tade Analysis Pojet) (Jansson et al., 2009), CAPSIM (China s Agiultual Poliy Simulation Model) (Yang et al., 2011), GTAP-AEZ (Global Tade Analysis Pojet AgoEologial Zones) (Hetel et al., 2009; Lee et al., 2009) and the ICES-AEZ (Intetempoal Computable Equilibium System AgoEologial Zones) (Mihetti and Paado, 2012). 1 Against this bakgound, we desibe a methodology to build a sub-national vesion of a CGE model and database pesenting oiginally the ounty as the highest detail. Ou efeene is the 1 Fo a bief suvey of the liteatue on sub-national CGE global models see setion 2 in Peali et al., (2012). Fo an extensive liteatue, see Rodiguez (2007). 3

6 GTAP model (Hetel, 1997). This poedue is applied demonstatively to Italy; howeve, it an be easily tansfeed to othe ounties povided data availability. At this stage, we split the Italian eonomi system in 10 setos and 3 mao-egions (Noth, Cente, South). In a next step, the model will be extended to all 20 Italian egions and 57 GTAP setos. Regionalization implies two wok phases: one on the database, and anothe on the model stutue. The fist onsists in the eation of sub-national Soial Aounting Maties aounting fo setoal inteations within sub national aeas and of eah of these with the est of the wold. The majo hallenge in this is the estimation of the inta national tade flows due to the usual lak of data of this kind. A typial solution is to use a gavitational appoah (Hoidge and Wittwe, 2010; Dixon et al. 2012). This method assumes that tade between two egions depends positively on thei setoal podution and negatively on thei distane. Nevetheless, this is only an appoximation beause othe vaiables play a ole in the detemination of the bilateal tade. We popose an altenative and innovative appoah. We ombine two soues of infomation: tanspot data and eonomi podution data both fom ISTAT (Italian National Statistial Institute).This method is likely to inease the data ealism beause tanspot infomation epesents atual flows. The seond task equies modifying the funtional stutue of the model espeially to intodue a diffeent degee of fatos and goods mobility within and between ounty bodes. In fat, both goods and fatos ae expeted to move easie within the ounty than between ounties. To test the pefomane of ou egionalized CGE model we ay out a simple expeiment (a unifom 20% deease in the podutivity of all pimay fatos in Italy) and we ompae the esults oming fom the standad ounty-level model with ou modified sub-national vesion. We also pefom some sensitivity tests on the elastiity of substitution paametes. The pape is oganized as follows. Setion 2 pesents the database onstution and the estimation stategy to obtain tade flows aoss sub-national egions. Setion 3 desibes the model impovement fo the fatos and goods maket. Setion 4 lays out the esults of the expeiment and sensitivity analysis. Setion 5 onludes and skethes some ideas fo futue eseah. 2. Database development To test and illustate the methodology, we puposefully keep the setoal and ounty disaggegation of ou model simple. Italy is detailed in its Nothen, Cental and Southen mao egions. The global eonomi system is just split in Euope and Rest of the Wold (Table 1). Setos ae 10 (Table 2). Ou stating point is the GTAP 7 database (Naayanan and Walmsley, 2008), onsisting of 57 setos and 113 ounties o goups of ounties. The efeene yea is Data on value added, labou and land input fo the 20 Italian egions and 40 podution setos deive fom ISTAT (Conti Eonomii Regionali, Anni ; Agioltua e Zootenia; Valoe Aggiunto ai Pezzi di Base dell Agioltua pe Regione, Anni ). ISTAT also epots bilateal flows in physial volume (tons) by mode of tanspotation (tuk, ail, wate and ai) fo the 20 Italian egions (Taspoto Mei su Stada, ; Taspoto Aeeo, ; Taspoto Maittimo, ; Taspoto Feoviaio, ), but fo a smalle numbe of setos (just 10 agiultual/industial setos). 2 2 Fo the moment, we use the oveall amount of aied goods as a poxy in the sevie setos. 4

7 Table 1: egional detail of the CGE model Aonym Noth Cente South EU ROW Desiption Nothen Italy: Aosta-Valley, Emilia-Romagna, Fiuli-Venezia Giulia, Liguia, Lombady, Piedmont, Tentino-South Tyol, Veneto Cental Italy: Lazio, Mahe, Tusany, Umbia Southen Italy: Abuzzi, Apulia, Basiliata, Campania, Calabia, Molise, Sadinia, Siily Rest of Euopean Union (27 ounties exept Italy) All emaining ounties in the wold Table 2: setoal detail of the CGE model Aonym GainsCops MeatLstk Extation PoFood TextWapp LightMnf HeavyMnf Util_Cons TansComm OthSevies Desiption Gains and ops Livestok meat poduts Mining and extation Poessed food Textiles and lothing Light manufatuing Heavy manufatuing Utilities and onstution Tanspot and ommuniation Othe sevies 2.1 Splitting the podution side In a CGE model, the podution side is detemined by the value of what is podued of evey good and sevie as well as by the amount of pimay fatos and intemediates needed to podue them. The fist step onsists thus in detailing these data, oiginally available at the ounty level, to the new egional sope. To do this, fist, we math the 40 ISTAT setos with the 10 mao-setos hosen in ou aggegation. Then, the egional shaes of value added, labou and land omputed fom ISTAT data ae used to distibute the espetive GTAP Italian data aoss the thee Italian mao-egions. Note that two moe pimay fatos appea in the GTAP database: apital and natual esoues. The espetive egional shaes ae not etievable fom ISTAT. Those of apital ae then omputed as a diffeene between value added and labou, while those of natual esoues ae poxied by the subnational shae of value added. It is then assumed that intemediate inputs of oigin seto i in the destination seto j ae distibuted aoding to the value added shae in the oigin seto. Fo example, the eonomi value of the agiultual goods, whih the Nothen Italian manufatues puhase, is detemined upon the agiultual value added shae in the sub-national egion. 5

8 2.2 Estimation of tade flows aoss sub-national egions The seond step, onsisting in the detemination of the bilateal tade flows aoss sub-national egions, is the most hallenging. These data ae vey often missing. To oveome the poblem the poedue usually adopted is the so-alled gavitational appoah as in Hoidge and Wittwe (2010) and Dixon et al. (2012). By this method, the bilateal inta-ounty tade flows ae estimated using a gavity equation as in the Newtonian physis. It aounts fo the setoal podution in the oigin and destination egions as attatos and the distane between them as fition. This poedue appealing fo simpliity is vey likely to intodue distotions and inonsistenies as it ovelooks the many fatos detemining tade flows. Some altenative appoahes exist. Fo example, Chintakan and Millimet (2006) and Canning and Tsigas (2000) use tanspot data fo United States to obtain tade flows aoss membe States. Dubé and Lemelin (2005) also use tanspot data to estimate the tade flows aoss thee subnational egions of Quebe. In addition, they integate this infomation with eonomi data about aggegate sub-national expots and impots and apply a oss-entopy optimisation method to make the two types of infomation onsistent. ISTAT does povide tanspot infomation. Theefoe, we also pefe to use tanspot data to depit bilateal flows athe than the gavitational appoah beause the fome seems to epesent moe effetively the atual flows of ommodity within a ounty. Following Dubé and Lemelin (2005), we adjust the tade flows aoss sub-national egions by the RAS statistial method (Deming and Stephan, 1940; Bahaah, 1970) to inease the onsisteny of tanspotation flows with the podution data. 3 In patie, the poedue is the following. Conside the shae matix Π epesented in Table 3. Aftewads, vetos and maties ae in bold type. In matix Π, the ows epesent the oigin, and the olumns the destination sub-national egions. Its geneal element π od, whee 0 π od tansfeed fom oigin to destination egion, by the total physial amount of aied goods within Italy. This implies that, we have 10 diffeent Π, one fo eah seto. As ou poedue is valid fo all the setos, fo sake of algebai simpliity we do not onside a seto index in the est of the sub-setion. 1, is omputed dividing the physial volume of good Table 3: Components of Matix Π Noth Cente South Tot Noth π 11 π 12 π 13 Π 1. Cente π 21 π 22 π 23 Π 2. South π 31 π 32 π 33 Π 3. Tot Π.1 Π.2 Π.3 1 Denoting Y the Italian setoal podution sold ountywide that is the value of setoal podution sold domestially, D the sub-national demand (exluded demand fo foeign goods), EXP the sub-national expots towads the othe sub-national egions, IMP the sub-national impots fom the othe sub-national egions, EXPAG the aggegate sub-national expots towads the est of Italy and IMPAG the aggegate sub-national impots fom the est of Italy, we ompute these vaiables fo, say, sub-national egion Cente, applying the following fomulas: 3 The RAS abbeviation stems fom the names of the vetos (R and S) and matix (A) used by Bahaah in the oiginal fomulation of the algoithm. Aoding to MDougall (1999) RAS is a type of oss-entopy optimization method and it should be pefeed in the absene of infomation about vaiation in olumn stutue o ow stutue of the matix. 6

9 (π π π (π π π (π π Y Y Y Y 22 π 23 π 32 π ) Y ) Y 32 EXP EXP IMP IMP ) Y Cente, Noth Cente,South EXPAG Noth,Cente South,Cente D IMPAG Cente Cente Cente (eq. sys. 1) We apply the same poedue fo eah sub-national egion. Now, it well may happen that the egional podution that an be infeed fom equation system 1 by applying: Y Y Y Noth Cente South D D D Noth Cente South EXPAG EXPAG EXPAG Noth Cente South IMPAG IMPAG Noth IMPAG Cente South (eq. sys 2) does not oinide with the podution value epoted by statistial soues. The equied adjustment takes plae though the bi-popotional RAS method. Conside the bilateal tade matix: A = Π Y of size 3 x 3, whee we put π 11 = π 22 = π 33 = 0. In matix A, the geneal element is a od whee ow o epesents the oigin and olumn d the destination sub-national egion espetively. We also have a taget veto of ow totals E (aggegate sub-national expots to the est of Italy, size 3 x 1) and a taget veto of olumn totals M (aggegate sub-national impots fom the est of Italy, size 3 x 1). Tagets ae omputed using the ISTAT infomation about eonomi podution (Y Noth, Y Cente and Y South ) aoding to the following equations: E E E M M M Noth Cente South Noth Cente South Y Y Y D D Noth Cente South D Noth Cente South D D D Noth Cente South EXPAG EXPAG EXPAG IMPAG IMPAG Noth Cente South Y Noth IMPAG Cente South Y Noth Y Cente South (eq. sys. 3) The RAS method attempts to find a new matix B suh that: o d b b od od M E o d whee b od, e o and m d ae, espetively, the geneal element of matix B, veto E and veto M. The new matix B is elated to the oiginal A via the iteative poedue: 7

10 b od (m) o (m) d a od whee (m) o is the multiplie of ow o and (m) d is the multiplie of olumn d. Fo this initial appliation, we split the Italian expots towads EU and est of the wold and Italian impots fom EU and est of the wold using the setoal sub-national shae of value added. 4 Applying ou methodology, we ae able to deive the value of podution (Table 4) and the inteegional tade (Table 5). In Table 5, as usual the ow epesents the oigin sub-national egion and the olumn the destination sub-national egion, espetively. 5 Table 4: value of podution (2004 million $) Noth Cente South GainsCops MeatLstk Extation PoFood TextWapp LightMnf HeavyMnf Util_Cons TansComm OthSevies We ae awae that this assumption is vey stong beause impot and expot pattens ae diffeent. Nevetheless, we use it only in this methodologial pape. We emove it in the 20 egions vesion of the model whee additional data fom ISTAT on sub-national foeign expots and impots ae available. 5 Few numbes in the extation and poessed food setos seem to be not ealisti. This ould depend on the inteation between the RAS adjustment poedue and the vey ough setoal and geogaphial aggegation adopted at this stage. Howeve, given the lak of eal bilateal tade data at the sub-national level we ae not able to assess popely the eliability of these esults. 8

11 Table 5: Bilateal tade flows (2004 million $) GainCops Noth Cente South EU ROW Tot exp MeatLstk Noth Cente South EU ROW Tot exp Noth Noth Cente Cente South South EU EU ROW ROW Tot imp Tot imp Extation Noth Cente South EU ROW Tot exp PoFood Noth Cente South EU ROW Tot exp Noth Noth Cente Cente South South EU EU ROW ROW Tot imp Tot imp TextWapp Noth Cente South EU ROW Tot exp LightMnf Noth Cente South EU ROW Tot exp Noth Noth Cente Cente South South EU EU ROW ROW Tot imp Tot imp HeavyMnf Noth Cente South EU ROW Tot exp Util_Cons Noth Cente South EU ROW Tot exp Noth Noth Cente Cente South South EU EU ROW ROW Tot imp Tot imp TansComm Noth Cente South EU ROW Tot exp OthSevies Noth Cente South EU ROW Tot exp Noth Noth Cente Cente South South EU EU ROW ROW Tot imp Tot imp

12 3. Changes in the model stutue In standad CGE models pimay fatos of podution like labou and apital ae mobile aoss setos, within the ounty o mao-egion and do not usually move, aoss ounties 6. Thee ae CGE models, like GTAP, whih also inlude land among pimay fatos. Land does not move physially, but an be used fo diffeent puposes, namely to gow diffeent ops. It is a sluggish fato of podution as thee ae onstaints in land uses aptued by an elastiity of tansfomation paamete whih detemines the land supply in eah agiultual seto. This setoal mobility of pimay input is lealy tehnologial/setoal athe than spatial. The issue is slightly diffeent fo intemediates and final onsumption goods. Both an be impoted and thus ae mobile aoss ounties. Howeve, in the CGE famewok, to pevent unealisti speialization phenomena and tade oveflows that ould wap the esults of the model, the Amington assumption (1969) is intodued. It postulates impefet substitutability between homologue domesti and impoted goods. The values of the Amington elastiity ae set by eonometi estimations, whih ae aied out at the national level. When, as in ou ase, the spatial detail of the CGE model is ineased, it would be unealisti to simply tansfe to sub national entities the same paameteization used in the national model. Both inta national pimay fato mobility and inta and exta egional goods and intemediates substitution equie additional assumptions. As to the fist point it is easonable to assume some, but not pefet, degee of fato mobility aoss egions within a ounty. As to the seond point some impefet substitution between goods podued in diffeent egions must be intodued. If not, unealisti full speialization o tade flows ould be obseved also at the egional levels. Following the empiial evidene that tade is bigge within than between ounties given the same distane - the so-alled bode effet (MCallum, 1995) - these Amington elastiities should be highe inta than inte ounty. 3.1 Mobility in fatos maket The value added in the standad GTAP model oiginates fom five pimay fatos: land, natual esoues, unskilled labou, skilled labou and apital. All the setos use labou and apital while only some use land and natual esoues (agiultue and mining-elated setos, espetively). Land and natual esoues supply is sluggish aoss setos while labou and apital ae pefetly mobile. All the pimay fatos ae spatially immobile. Fo ou sub-national ontext, we assume the following: 1) Pimay fatos setoal mobility does not hange. 2) Land and natual esoues emain spatially immobile at the sub-national level. 3) Sub-national unskilled labou, skilled labou and apital supply is geogaphially sluggish within Italian egions and still immobile with espet to the est of Euope and the est of the wold. The thid assumption is new with espet to the standad GTAP model. It is implemented though a CET (Constant Elastiity of Tansfomation) funtion: as a esult, wokes and apital an move outside the Italian egion they belong to in esponse to eonomi shoks. 7 6 Moe sophistiated CGE models an in fat model labo o apital flows aoss ounties. 7 Note this inta-ounty mobility is lowe than that impliitly assumed by the National model, but lage than that that the same model assumes inte-ounty. 10

13 Fist ode onditions of the CET supply funtion and the fomula to detemine the national pie of the endowment (shadow pie) ae given in the equations 1-6, whee QL, QH, QK, PL, PH, and PK epesent, espetively, the quantity of supplied unskilled labou, skilled labou, apital and the assoiated pies. and ae, espetively, the unique Italian aggegate index and the subnational index. The paametes L, H and K ae the elastiity of substitution of the endowment supply, they ae a measue of geogaphial mobility. Ineasing the absolute value of these paametes means ineasing the fatos mobility within Italy. At this vey fist stage, we make the hypothesis that. L H K QL QL QH QK QL PL QH QH PH QK QK PK PL PL QL PH PH QH PK PK QK PL L H PH K PK L 0 H K 0 0 (1) (2) (3) (4) (5) (6) 3.2 The tade stutue aoss sub-national egions In the standad GTAP model the demand side is omposed by pivate onsumption, govenment spending and intemediate goods 8. The demand tee follows a double nest (Figue 1). The fist nest links domesti demand and aggegate foeign impots of a speifi ommodity (iespetive of oigin ounty) fo eah agent (households, govenment, fims). The seond nest diffeentiates foeign impots aoding to the geogaphial oigin. The seond model impovement thus onsists in modifying that tee in ode to make sub-national poduts lose substitutes among them than the foeign poduts. To ahieve this goal we inset two additional bundles fo eah sub-national egion keeping unhanged the stutue fo the est of Euope and the est of the wold. Figue 2 illustates the new demand tee. 8 These ae not exlusive. Of ouse, eonomi agents an also employ thei inome altenatively; namely, fims will buy some amount of pimay fatos (that have the speifi teatment highlighted in the pevious setion) and households will alloate some shae of inome to savings. Howeve, teatment of pimay fatos and savings ae not affeted by the model impovement explained hee. It only applies to ommodities/goods poduible both domestially and aboad. 11

14 Total demand in ounty fo good i by households, govenment and fims CES ARM Domesti demand in ounty fo good i by households, govenment and fims Aggegate foeign impots in ounty fo good i by households, govenment and fims CES IMP Foeign impots fom ounty 1 fo good i by households, govenment and fims Foeign impots fom ounty fo good i by households, govenment and fims Foeign impots fom ounty C fo good i by households, govenment and fims Soue: Hetel (1997) Figue 1 GTAP standad ommodity demand stutue 12

15 Total demand in sub-national egion s whih belongs to ounty fo good i by households, govenment and fims CES ARM1 National demand in sub-national egion s fo good i by households, govenment and fims Aggegate foeign impots in subnational egion s fo good i by households, govenment and fims CES IMP1 CES ARM2 Foeign impots fom ounty 1 fo good i by households, govenment and fims Foeign impots fom ounty fo good i by households, govenment and fims Foeign impots fom ounty C fo good i by households, govenment and fims Domesti demand in sub-national egion s fo seto i by households, govenment and fims Aggegate impots in sub-national egion s fom the othe sub-national egions fo seto i by households, govenment and fims CES IMP2 Impots fom sub-national egion 1 s fo good i by households, govenment and fims Impots fom sub-national egion s s fo good i by households, govenment and fims Impots fom sub-national egion S s fo good i by households, govenment and fims Figue 2 GTAP sub-national ommodity demand stutue 13

16 Compaed to the national CGE vesion, Figue 2 depits two futhe bundles beause the national demand in the sub-national egions is boken in two pats. The uppe bundle links domesti demand and aggegate inta-national impots while the lowe bundle diffeentiates the impots with espet to the oigin sub-national egion. We inset onsistently fou additional paametes ARM1, IMP1, ARM2 and IMP2. Two elations haateises the fou paametes: ARM = ARM1 < ARM2 IMP = IMP1 < IMP2 whee ARM and IMP ae the Amington eleastiities in the standad GTAP model epesented in Figue 1. We use CES (onstant elastiity of substitution) funtions to model the inte-national and inta-national bundles. As the following equations apply to all setos in the same manne, fo sake of algebai simpliity we do not onside a seto index in the est of the sub-setion. Stating fom pivate onsumption, QC, QCD and QCM, epesent, espetively, the quantity of total, domesti and impoted pivate goods in the ounty o goup of ounties, epesented by index. QCU, QCDU and QCMU ae, espetively, total, national and intenational impoted pivate goods in the sub-national egion (the suffix U stands fo uppe bundle). QCDL and QCML epesent the domesti and inta-national impoted pivate goods in the sub-national egion (the suffix L stands fo lowe bundle). PC, PCD, PCM, PCU, PCDU, PCMU, PCDL and PCML ae the assoiated pies. The equations 7-12 show the mathematis behind the old tade stutue fo ounties in Figue 1 and the new tade stutue in Figue 2 fo sub-national egions: QCD QCM QCDU PC QC PCD PC QC PCM PCU QCMU QCU PCMU PCDU QCDL QCDU PCDL PCDU QCML QCDU PCML ARM ARM PCU QCU PCDU ARM1 ARM1 ARM2 ARM2 ARM ARM 0 0 ARM1 ARM1 ARM2 ARM (7) (8) (9) (10) (11) (12) QG, QGD and QGM, epesent, espetively, the quantity of total, domesti and impoted goods puhased by govenment in the ounty o goup of ounties. QGU, QGDU and QGMU ae, espetively, total, national and intenational impoted goods puhased by govenment in the subnational egion. QGDL and QGML epesent the domesti and inta-national impoted govenment goods puhased by the govenment in the sub-national egion. PG, PGD, PGM, PGU, PGDU, PGMU, PGDL and PGML ae the assoiated pies. 14

17 The equations desibe the new tee fo the govenment demand: QGD QGM PG QG PGD PG QG PGM PGU QGDU QGU PGDU PGU QGMU QGU PGMU PGDU QGDL QGDU PGDL PGDU QGML QGDU PGML ARM ARM ARM1 ARM1 ARM2 ARM2 ARM ARM 0 0 ARM1 ARM1 ARM2 ARM (13) (14) (15) (16) (17) (18) Finally, QI, QID and QIM, epesent, espetively, the quantity of total, domesti and impoted intemediate goods in the ounty o goup of ounties. QIU, QIDU and QIMU ae, espetively, total, national and intenational impoted intemediate goods in the sub-national egion. QIDL and QIML epesent the domesti and inta-national impoted intemediate goods in the sub-national egion. PI, PID, PIM, PIU, PIDU, PIMU, PIDL and PIML ae the assoiated pies. The equations pesent the demand fo intemediate goods: QID QIM PI QI PID PIU QIDU QIU PIDU PIU QIMU QIU PIMU PIDU QIDL QIDU PIDL PIDU QIML QIDU PIML PI QI PIM ARM1 ARM1 ARM1 ARM1 ARM2 ARM2 ARM ARM 0 0 ARM1 ARM1 ARM2 ARM (19) (20) (21) (22) (23) (24) 15

18 The domesti demand is the sum of the thee domesti demand omponents: pivate onsumption, govenment spending and intemediate goods. QDS is the quantity of demanded domesti goods and PDS is the assoiated pie. The equations ae: PDS QDS PCD PDS QDS PCDL QCDL PGDL QGDL PIDL QIDL QCD PGD QGD PID QID The impoted demand is also the sum of the thee impoted demand omponents: pivate onsumption, govenment spending and intemediate goods. QAI, QAIU and QAIL ae, espetively, the quantity of aggegate impoted goods in the ounty, the aggegate impoted goods fom aboad in the sub-national egion and the aggegate impoted goods fom the othe subnational egions. PAI, PAIU and PAIL ae the assoiated pies. The fomulas ae: (25) (26) PAI QAI PCM PAIU QAIU PCMU QCMU PGMU QGMU PIMU QIMU PAIL QAIL PCML QCML PGML QGML PIML QIML QCM PGM QGM PIM QIM (27) (28) (29) The additional sub-national nest fo impots also equies modifying the stutue of the bilateal tade flows. Fo ounties in the est of Euope and est of the wold, things do not hange but fo the Italian egions, we intodue two bundles. We use CES pefeenes to model these two nests. In the following equations QXS, QXSU and QXSL epesent, espetively, the bilateal tade flows fom ounty d to ounty, the bilateal tade flows fom ounty to sub-national egion, the bilateal tade flows fom sub-national egion s to sub-national egion. PXS, PXSU and PXSL ae the assoiated pies. The equations ae epoted below: QXS d QXS QXSU QXSU QXSL s d QXSL PAI QAI PXS s d PXS PAIU QAIU PXSU s d PXSU PXSL QAI PAI s d IMP QAIU PAIU PAIL QAIL PXSL s QAIL PAIL IMP1 IMP2 IMP IMP1 0 IMP2 0 0 (30) (31) (32) (33) (34) (35) 4. Testing the model This setion tests the pefomane of ou sub-national model. A simple 20% unifom podutivity loss in all pimay fatos though the Italian teitoy is imposed to the diffeent model speifiations summaized below: 16

19 The AI (Aggegated Italy) model onsides Italy as whole, est of Euope and est of the wold. The theoetial stutue and paamete values ae those of the standad GTAP model. It is the benhmak. The RI (Regionalized Italy) model disentangles Noth, Cente and South of Italy, est of Euope and est of the wold. Howeve, in this model, Italian egions behave exatly as GTAP ounties. They epliate at the egional level the oiginal ountywide paametes. The RI model thus assumes immobile pimay fatos aoss Italian egions and the same impefet good substitutability in inta-egional and intenational tade. It thus pesents the lowest degee of maket integation and flexibility at the sub-national level. The RIMFM (Regionalised Italy with geogaphial Mobility in Fatos Maket) is like RI, but adds sluggish mobility in fato makets within Italy fo apital and labou. The supply elastiity is the same fo all these pimay fatos ( FAC = K = L = H ). In ou efeene ase, this paamete is set equal to -10. In the RIARM (Regionalised Italy with ineased inte egional Amington elastiities) speifiation the geogaphial detail is as in RI and RIMFM, but we build the new tade stutue to make poduts lose substitutes inside than outside the national bodes. In addition, we put fou additional paametes fo the sub-national egions, ARM1, ARM2, IMP1, and IMP2. In the efeene ase, thei values ae set aoding to the following fomulas: ARM2 = 5 ARM1 IMP2 = 5 IMP1 ARM1 = ARM IMP1 = IMP whee ARM and IMP ae the values adopted in the standad GTAP model. Finally, in the RIAFM (Regionalised Italy with both ineased Amington and mobility in Fato Makets) model both hanges in goods and fatos maket ae inopoated. RIAFM is the full model with the highest degee of maket integation and flexibility at the sub-national level. In addition to the oss model ompaison, we also ay out a sensitivity analysis on the following paametes adopted at the sub-national level: i) Amington elastiity fo inta-national tade, and ii) CET elastiity fo inta-national fato mobility. 4.1 Model ompaison Ou ompaison fouses on the pe ent vaiations in eal GDP and setoal podution (Table 6). As expeted, GDP unambiguously deeases onsequent the negative podutivity shok on pimay fatos. Consideing Italy as a whole, a fist esult is that the aggegated ounty pefomane and setoal podution do not hange exessively aoss the diffeent model speifiations. This points out a omfoting obustness of ou methodology. Distibutional effets aoss Italian mao-egions ae moe inteesting. When GDP is onened, the RI and the RIARM models pesent the moe stable esults (loss aound 20%). This is onsistent with these two speifiations assuming no spatial mobility in pimay fatos. Basially the Italian egions ae onneted just by inteegional impot expot of goods and sevies. Appaently, the highe substitutability in inteegional goods with espet to intenational ommodities intodued by the RIARM speifiation altes only maginally the esults. These outomes ae epliated at the 17

20 setoal level, even though egional diffeenes aoss the two speifiations ae slightly moe visible espeially in some setos (Util_Cons, TextWapp and MeatLstk). 18

21 Table 6: model ompaison (eal GDP % vaiations wt the basedata) Noth RI RIMFM RIARM RIAFM Cente RI RIMFM RIARM RIAFM GDP GDP GainsCops GainsCops MeatLstk MeatLstk Extation Extation PoFood PoFood TextWapp TextWapp LightMnf LightMnf HeavyMnf HeavyMnf Util_Cons Util_Cons TansComm TansComm OthSevies OthSevies South RI RIMFM RIARM RIAFM Italy RI RIMFM RIARM RIAFM AI GDP GDP GainsCops GainsCops MeatLstk MeatLstk Extation Extation PoFood PoFood TextWapp TextWapp LightMnf LightMnf HeavyMnf HeavyMnf Util_Cons Util_Cons TansComm TansComm OthSevies OthSevies

22 Re-distibutional effets ae moe ponouned in the RIMFM and RIAFM models. The most impotant diffeene intodued is the pimay-fato mobility. Now Noth is lealy advantaged by the moe flexible labou and apital maket (GDP loss is about 18%, 19% espetively) while South is penalized (GDP deease is about 24%, 23% espetively). Fato mobility amplifies the diffeene between South and Cente/Noth egions as labou and apital move fom South to Noth and Cente. Uneven pattens aoss the Italian egions ae also obseved at the setoal level, in patiula in the Util_Cons and LightMnf setos and espeially in the RIMFM speifiation, whee the lowe substitutability in onsumption of goods oming fom Italian egions fostes egional speialisation phenomena. By ompaing RIMFM and RIAFM speifiations it is onfimed that the new Amington tade stutue does not hange muh the patten of the distibutional effets. 4.2 Sensitivity analysis In this setion, we ondut a sensitivity analysis on the Amington and the CET elastiity in the sub-national endogenous supply of mobile pimay fatos. These two paametes ae fundamental dives of the model esults. Moeove, thee is limited quantitative suppot to thei eonometi estimation. This is a futhe motivation to justify a sensitivity test. The sensitivity analysis is aied out on the last speifiation (RIAFM) that is ompehensive of all modifiations. Figue 3 epesents Italian ountywide and egional GDP pefomanes unde fou diffeent assumptions on fatos mobility, implemented vaying the elastiity of tansfomation FAC in the CET funtion. Amington elastiity is kept at the efeene ase. Fato mobility is ineased aoding to the following sheme: fa_1 FAC = 0 fa_2 FAC = -10 fa_3 FAC = -100 fa_4 FAC = whee fa_1 epesents no fato mobility ase and fa_4 the maximum level of fato mobility. They ae depited on the hoizontal axis. In Figue 4 fato mobility is kept at the efeene ase ( FAC = -10) while we pogessively inease the substitution aoss poduts (i.e., Amington elastiities) oming fom diffeent Italian egions using the fomulas epoted below (epesenting, espetively, low, medium-low, mediumhigh and high mobility in the goods maket): am_1 ARM2 = ARM1, IMP2 = IMP1 am_2 ARM2 = 5 ARM1, IMP2 = 5 IMP1 am_3 ARM2 = 10 ARM1, IMP2 = 10 IMP1 am_4 ARM2 = 15 ARM1, IMP2 = 15 IMP1 Finally, Figue 5 meges these diffeent tests as follows: am_fa_1 ARM2 = ARM1, IMP2 = IMP1, FAC = 0 am_fa_2 ARM2 = 5 ARM1, IMP2 = 5 IMP1, FAC = -10 am_fa_3 ARM2 = 10 ARM1, IMP2 = 10 IMP1, FAC = -100 am_fa_4 ARM2 = 15 ARM1, IMP2 = 15 IMP1, FAC =

23 Figue 3: eal GDP % vaiations wt the basedata (fatos mobility omponent) Figue 4: eal GDP % vaiations wt the basedata (Amington omponent) Figue 5: eal GDP % va wt the basedata (fatos mobility and Amington omponents) 21

24 The aim is to disentangle the mobility fato omponent (Figue 3), the sub-national Amington omponent (Figue 4) and finally to analyse thei inteation (Figue 5). It is immediately evident that ineasing fatos mobility amplifies the sub-national divegenes while ineasing podut substitution in onsumption tigges a onvegene poess. Howeve, it is woth noting that the fist effet dominates the seond (ompaing the sales on the vetial axis in Figues 3 and 4) at least onsideing the oveall effet on eal GDP. Aodingly, when the two effets ae ompounded in Figue 5, we an still note an ineased divegene due to the pevailing dynami elated to the CET paamete, but smalle than that of Figue 3 due to the ountebalaning effet of the Amington elastiity. This said, the inteation between the Amington and CET elastiities is not neessaily tivial. Fo instane Cente Italy in Figue 5 hanges its slope ompaed to Figue 3 due to the poduts substitutability effet. In othe wods, if fatos mobility seems impotant fo magnitudes, Amington elastiity an still affet the dietion of hanges. Table 7 epots sensitivity analysis esults fo setos, whih onfims those aleady obseved fo GDP. Moving towad a moe flexible and integated eonomi envionment, the setoal pefomanes tend to divege aoss egions, but this is due to the pevalene of the fato mobility effet ove the good substitutability effet. Finally, the above-mentioned dynamis depends also on the type of shok analyzed. Affeting unifomly all the pimay fatos, as we did, means fo instane to deease the impotane of all the heteogeneity stemming fom the standad famewok of ompaative advantages based on diffeent egional endowments. Shoking pimay fatos one-by-one would on the ontay amplify the edistibution poess aoss egions due to egional diffeenes in fato intensity (the well known Rybzyski theoem (Rybzyski, 1955)). 22

25 Table 7: sensitivity on elastiity paametes (eal GDP % vaiations wt the basedata) Noth am_fa_1 am_fa_2 am_fa_3 am_fa_4 Cente am_fa_1 am_fa_2 am_fa_3 am_fa_4 GDP GDP GainsCops GainsCops MeatLstk MeatLstk Extation Extation PoFood PoFood TextWapp TextWapp LightMnf LightMnf HeavyMnf HeavyMnf Util_Cons Util_Cons TansComm TansComm OthSevies OthSevies South am_fa_1 am_fa_2 am_fa_3 am_fa_4 Italy am_fa_1 am_fa_2 am_fa_3 am_fa_4 GDP GDP GainsCops GainsCops MeatLstk MeatLstk Extation Extation PoFood PoFood TextWapp TextWapp LightMnf LightMnf HeavyMnf HeavyMnf Util_Cons Util_Cons TansComm TansComm OthSevies OthSevies

26 5. Conlusions and futhe eseah In this pape, we desibe a methodology to develop a sub-national CGE model stating fom a national model and database. This methodology, ooted in the mainsteam liteatue, adds some elements to inease the ealism of the analysis. It uses both tanspot infomation and eonomi data in a onsistent statistial famewok via the RAS method to obtain a sub-national database fo Italy. Moeove, the model impovements allow fo inta-national goods and fato mobility (with espet the omplete mobility of ounty-saled models) without affeting the intenal onsisteny of advaned CGE models. We un a numbe of simulations testing the same shok (a 20% unifom podutivity loss in all pimay fatos) on diffeent vesions of the model, vaying in flexibility of the Italian eonomi system. The distibutional effets at the sub-national level show lealy diveging pattens both at the setoal and GDP level, whih ae diven by the inteegional mobility in the fatos maket, while diffeent degees of substitutability in onsumption of goods fom diffeent Italian egions play a mino ole. A sensitivity analysis on the newly intodued elastiity paametes onfims the abovementioned esults: while ineasing fato mobility aoss Italian egions ineases the divegene of egional pefomanes, highe substitutability in onsumption deeases it. The fome effet dominates the latte. Nonetheless this last an influene the dietion of the fome. Finally, the welfae outomes measued in tems of GDP loss impove when moving towad moe flexible and integated makets at the sub-ounty level, suggesting a highe apaity of Italian sub-national agents to eat to hanges in elative maket pies (maket-diven o autonomous adaptation featue typial of CGE models) when affeting all the fatos in a unifom manne. Futhe eseah involves both the database and the model. Conening the database, the next step is the extension of this fist vesion onening 3 mao-egions and 10 setos to the 20 Italian egions and 57 setos. With egad to the modelling pat, we will test the model on eal shoks (e.g. those onsequent exteme natual events suh as floods) to impove the model paameteization. 24

27 Aknowledgments The eseah leading to these esults has eeived funding fom the Italian Ministy of Eduation, Univesity and Reseah and the Italian Ministy of Envionment, Land and Sea unde the GEMINA pojet. The authos ae the only esponsible fo eos and omissions in this wok. 25

28 Refeenes Aaheim, A., Dokken, T., Hohaine, S., Hof, A., Johem, E., Mehle, R. & van Vuuen, D.P. (2010). National esponsibilities fo adaptation stategies: Lessons fom fou modelling famewoks. In M. Hulme and H. Neufeld (Eds.). Making Climate Change Wok fo Us: Euopean Pespetives on Adaptation and Mitigation Stategies, Cambidge Univesity Pess, Cambidge. Andeson, K., Matin, W. & van de Mensbugghe, D. (2005a). Maket and Welfae Impliations of Doha Refom Senaios. In Andeson, K., Matin, W. (Eds.) Agiultual Tade Refom and the Doha Development Agenda. Washington, D.C., OUP and the Wold Bank: Chapte 12. Andeson, K., Matin, W. & van de Mensbugghe, D. (2005b). Global Impats of the Doha Senaios on Povety. In Hetel, T.W., Wintes, L.A. (Eds.) Putting Development Bak into the Doha Agenda: Povety Impats of a WTOAgeement. Washington, D.C., the Wold Bank: Chapte 17. Amington, P. (1969). A Theoy of Demand fo Poduts Distinguished by Plae of Podution. IMF staff papes, 16(1), Bahaah, M. (1970). Bipopotional Maties & Input-Output Change. Numbe 16 in Univesity of Cambidge Depatment of Applied Eonomis Monogaphs. Cambidge Univesity Pess. Bigano, A., Bosello, F., Roson, R. & Tol, R. (2008). Eonomy-wide impats of limate hange: a joint analysis fo sea level ise and touism, Mitigation and Adaptation Stategies fo Global Change, Vol. 13, n. 8. Böhinge, C., Ruthefod, T.F. & Tol, R. (2009). The EU 20/20/20 tagets: an Oveview of the EMF22 Assessment, Enegy Eonomis, 31: Böhinge, C., Fishe, C. & Rosendahl, K.E. (2010). The global effets of subglobal limate poliies, Resoues fo the Futue Disussion Pape, pp Böhinge, C., Balistei, E.J. & Ruthefod T.F. (2012). The ole of bode abon adjustment in unilateal limate poliy: Oveview of an Enegy Modeling Foum study (EMF 29), Enegy Eonomis 34, S97 S110. Bosello, F., Niholls, R., Rihads, J., Roson, R. & Tol, R. (2012). Eonomi impats of limate hange in Euope: sea-level ise, Climati Change, Spinge, vol. 112(1), pages 63-81, May. Bouet, A., Bueau, J.C., Deeux, Y., & Jean, S. (2005). Multilateal Agiultual Tade Libealisation: The Contasting Fotunes of Developing Counties in the Doha Round. Wold Eonomy, 28(9), Bovenbeg, A.L. (1987). Indiet Taxation in Developing Counties: A Geneal Equilibium Appoah, Intenational Monetay Fund Staff Papes, 34. Canning, P. & Tsigas, M. (2000). Regionalism, Fedealism, and Taxation: A Food and Fam Pespetive. Tehnial Bulletin No. 1882, Eonomi Reseah Sevies, U.S. Depatment of agiultue. Chintakan, P. & Millimet, D.L. (2006). The Envionmental Consequenes of Tade: Evidene fom Subnational Tade Flows. Jounal of Envionmental Eonomis and Management, Elsevie, 52(1), Cisa, J.-C., Iglesias, A., Feyen, L., Szabó, L., Van Regemote, D., Amelung, B., Niholls, R., Watkiss, P., Chistensen, O.B., Dankes, R., Gaote, L., Goodess, C.M., Hunt, A., Moeno, A., 26

29 Rihads, J. & Soia, A. (2011). Physial and eonomi onsequenes of limate hange in Euope. Poeedings of the National Aademy of Sienes of the United States of Ameia, 108(7), pp Dawin, R. & Tol, R. (2001). Estimates of the Eonomi Effets of Sea Level Rise, Envionmental & Resoue Eonomis, Euopean Assoiation of Envionmental and Resoue Eonomists, vol. 19(2), pages , June. Deming, W.E. & Stephan, F.F. (1940). On a Least-squaes Adjustment of a Sampled Fequeny Table when the Expeted Maginal Totals ae Known. Annals of Mathematial Statistis, 11, Dixon, P. (2001). Notes on Poliy Appliations of CGE Modeling in Austalia, May 29. Dixon, P., Rimme, M. & Wittwe, G. (2012). USAGE-R51, a State-level Multi-egional CGE Model of the US Eonomy: Dubé, J. & Lemelin, A. (2005). Estimation Expéimentale des Flux d Ehanges Inteégionaux pa la Méthode de Minimisation de l Entopie Coisée. Revue Canadienne des Sienes Régionales/Canadian Jounal of Regional Siene, 28(3), Euopean Commission (2008). Pakage of implementation measues fo the EU s objetives on limate hange and enewable enegy fo 2020, Commission Staff woking doument SEC (2008) 85 II. Euopean Commission (2010). Analysis of options to move beyond 20% geenhouse gas emission edutions and assessing the isk of abon leakage, Commission Staff woking doument SEC (2010) 650. Eboli, F., Paado, R. & Roson, R. (2010). Climate Change Feedbak on Eonomi Gowth: Exploations with a Dynami Geneal Equilibium Model. Envionment and Development Eonomis, 15 (5), pp Fançois, J.F., Ma Donald, B. & Nodstöm, H. (1995). Assessing the Uuguay Round. In Matin, W., Wintes, L.A. (Eds.), The Uuguay Round and the Developing Eonomies (pp ). Wold Tade Oganization: Wold Bank. Haison, G.W., Ruthefod, T.F. & Ta, D.G. (1997). Quantifying the Uuguay Round. Eonomi Jounal, 107(444), Hetel, T.W. (Ed.). (1997). Global tade analysis: Modeling and appliations. Cambidge and New Yok: Cambidge Univesity Pess. Hetel, T. W. & Keeney, R. (2005). What's at stake: the elative impotane of impot baies, expot subsidies and domesti suppot. In Andeson, K., Matin, W. (Eds.), Agiultual Tade Refom and the Doha Development Agenda. Washington, D.C., OUP and the Wold Bank: Chapte 2. Hetel, T.W., Lee, H., Rose, S. & Sohngen, B. (2009). Modelling Land Use Related Geenhouse Gas Soues and Sinks and thei Mitigation Potential. In Hetel, T.W., Rose, S. & Tol, R. (Eds), Eonomi Analysis of Land Use in Global Climate Change Poliy, Chapte 6. London and New Yok: Routledge. Hoidge, M. & Wittwe, G. (2010). Binging Regional Detail to a CGE Model Using CENSUS Data. Spatial Eonomi Analysis, 5(2), ISTAT. Agioltua e Zootenia. ISTAT. Conti Eonomii Regionali. Anni ISTAT. Taspoto Mei su Stada

30 ISTAT. Taspoto Aeeo ISTAT. Taspoto Maittimo ISTAT. Taspoto Feoviaio ISTAT. Valoe Aggiunto ai Pezzi di Base dell Agioltua pe Regione. Anni Jansson, T.G., Kuipe, M.H. & Adenäue, M. (2009). Linking CAPRI and GTAP. SEAMLESS epot no. 39. Jean, S. & Labode, D. (2004). The Impat of Multilateal Libealisation on Euopean Regions: a CGE Assessment. CEPII Woking Pape, No Jogenson, D.W. (1997). Tax Poliy and the Cost of Capital, Cambidge: MIT Pess. Lee, H., Hetel, T.W., Rose, S. & Avetisyan, M. (2009). An Integated Global Land Use Database fo CGE Analysis of Climate Poliy Options. In Hetel, T.W., Rose, S. & Tol, R. (Eds), Eonomi Analysis of Land Use in Global Climate Change Poliy, Chapte 4. London and New Yok: Routledge. MCallum, J. (1995). National Bodes Matte: Canada-U.S. Regional Tade Pattens. Ameian Eonomi Review, 85(3), MDougall, R. (1999). Entopy Theoy and RAS ae Fiends. GTAP Woking Papes 300, Cente fo Global Tade Analysis, Depatment of Agiultual Eonomis, Pudue Univesity. MDougall, R. (2002). A New Regional Household Demand System fo GTAP. GTAP Tehnial pape 20, Cente fo Global Tade Analysis, Depatment of Agiultual Eonomis, Pudue Univesity. Mihetti, M. & Paado R. (2012). Impoving Land-use Modelling within CGE to Assess Foestbased Mitigation Potential and Costs. Woking Pape , Fondazione Eni Enio Mattei. Naayanan, B. & Walmsley, T. (2008). Global Tade, Assistane, and Podution: The GTAP 7 Data Base. Cente fo Global Tade Analysis, Pudue Univesity. Noman, V.D., Assessing Tade and Welfae Effets of Tade Libealization: A Compaison of Altenative Appoahes to CGE modelling with impefet ompetition. Euopean Eonomi Review, 34(4), Peali, F., Pieoni, L. & Standadi, G. (2012). Wold Taiff Libealization in Agiultue: An Assessment Using a Global CGE Tade Model fo EU15 Regions. Jounal of Poliy Modeling, 34(2), Pete, M.W., Hoidge, M., Meaghe, G.A., Naqvi, F. & Pamente, P.R. (1996). The Theoetial Stutue of MONASH-MRF. Cente of Poliy Studies/IMPACT Cente Woking Papes op-85, Monash Univesity, Cente of Poliy Studies/IMPACT Cente. Powell, A. & Snape, R. (1993). The Contibution of Applied Geneal Equilibium Analysis to Poliy Refom in Austalia, Jounal of Poliy Modeling Vol. 15(4), pp Rybzynski, T.M. (1955). Fato Endowments and Relative Commodity Pies. Eonomia, 22, Rodiguez, U-P. E. (2007). State-of-the-At in Regional Computable Geneal Equilibium Modelling with a Case Study of the Philippines, Agiultual Eonomis Reseah Review, Agiultual Eonomis Reseah Assoiation (India), 20(1), Shoven, J.B. and Whalley, J. (1984). Applied Geneal Equilibium Models of Taxation and Intenational Tade: An Intodution and Suvey, Jounal of Eonomi Liteatue, 22 (3):