Regional Computable General Equilibrium Model of Japan and the Global Economy

Ken Itakura and Tomohiro Iwamoto

No 61, TUPD Discussion Papers from Graduate School of Economics and Management, Tohoku University

Abstract: There has been growing interest in sub-national economic impact of mega-FTAs (Free Trade Agreements). Our aim is to explore the linkages between sub-national regions in a country and the global economy. We incorporates sub-national regions(prefectures) in Japan to a global computable general equilibrium (CGE) model. Pre-fectures are introduced to the Global Trade Analysis Project (GTAP) database (Aguiar et al., 2019), and the comparative static GTAP model (Hertel, 1997; McDougall, 2003; Corong et al., 2017). Input-Output (IO) table from each prefecture is used to database construction. In the modified model, domestic inflows and outflows of goods and services in Japan are introduced. To illustrate sub-national impact of mega-FTA, we experiment a set of trade liberalization scenarios. Results reveals that all prefectures in Japan gains from the liberalized trade in terms of the positive impact on economic welfare. In contrast, results on real gross regional product (GRP) of prefecture are mixed in effect where some prefectures gain and some lose. As the parameter value of substitution of domestic trade among prefectures increases, the real GDP in Japan tends to decrease while economic welfare slightly increases.

Pages: 21 pages
Date: 2024-12
New Economics Papers: this item is included in nep-geo and nep-int
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