Assessing Economic Impacts of Thailand’s Fiscal Reallocation between Biofuel Subsidy and Transportation Investment: Application of Recursive Dynamic General Equilibrium Model

Korrakot Phomsoda, Nattapong Puttanapong and Mongkut Piantanakulchai
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Korrakot Phomsoda: Sirindhorn International Institute of Technology, School of Civil Engineering and Technology, Thammasat University, Pathum Thani 12120, Thailand
Mongkut Piantanakulchai: Sirindhorn International Institute of Technology, School of Civil Engineering and Technology, Thammasat University, Pathum Thani 12120, Thailand

Energies, 2021, vol. 14, issue 14, 1-32

Abstract: This study examined the economy-wide effects of reallocating the biofuel subsidy to invest in transportation using a recursive dynamics computable general equilibrium model. The constructed model consists of 35 sectors, 42 commodities, and 3 institutions (household, government, and the rest of the world). Three scenarios were simulated. In the first scenario, the subsidy of gasohol and biodiesel is completely removed, whereas, in the second and third scenarios, half of the removed subsidy is reallocated to finance investment in road freight transportation and road public transportation. The simulation results show that reallocating the biofuel subsidy to invest in road public transportation can lead to the highest long-term economic growth and has the lowest impact on the consumer price index (CPI). All findings suggest that policymakers should maintain continuous investment in transportation and prioritize this investment policy over the fuel price distortion scheme.

Keywords: computable general equilibrium; investment; transportation; logistics; subsidy (search for similar items in EconPapers)
JEL-codes: Q Q0 Q4 Q40 Q41 Q42 Q43 Q47 Q48 Q49 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (1)

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