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Regional Disparities in the Effects of Trade Liberalization: Computable general equilibrium analysis based on an inter-regional input-output table (Japanese)

Shiro Takeda () and Kanemi Ban

Discussion Papers (Japanese) from Research Institute of Economy, Trade and Industry (RIETI)

Abstract: Since the 1990s, computable general equilibrium analysis (CGE analysis) has been in widespread use as a tool for quantitative evaluation of the impact of trade policy, and many CGE analyses have evaluated the impact of trade liberalization at a macro level. However, no study has attempted to evaluate its impact at a regional level, that is, how trade liberalization affects individual Japanese regions. Given that trade liberalization is likely to generate highly dissimilar effects in different regions, and that regional disparities have been recognized as a serious problem in recent years, it is of great importance to analyze regions individually. Using a CGE model, this paper aims to elucidate the regional effects of trade liberalization in Japan. We use an inter-regional CGE model with 23 sectors and 8 domestic regions, and the Interregional Input-Output Table for Japan 2000 for the benchmark data. The main conclusions are as follows. First, trade liberalization increases welfare and GDP in Japan as a whole, a finding that is consistent with previous studies in this area. Second, the magnitude of the GDP and welfare effects differs significantly between regions. In particular, the Kanto, Chubu and Kinki regions have high rates of increase in both welfare and GDP, while the corresponding rates in Hokkaido, Tohoku and Kyushu-Okinawa are low or negative. Of particular note is that regional disparities in the welfare effect are very marked. In addition, not only were there regional disparities, but the higher (lower) a region's per capita GDP was, the higher (lower) were the benefits of liberalization. This means that trade liberalization exacerbates existing regional disparities. These results suggest that if the correction of regional disparity is made a policy goal, it would not be desirable for trade liberalization to be implemented alone, but rather it should be implemented in conjunction with an income-redistribution policy.

Pages: 35 pages
Date: 2008-09
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