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

Author

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  • Korrakot Phomsoda

    (Sirindhorn International Institute of Technology, School of Civil Engineering and Technology, Thammasat University, Pathum Thani 12120, Thailand)

  • Nattapong Puttanapong

    (Faculty of Economics, Thammasat University, Bangkok 10200, Thailand)

  • Mongkut Piantanakulchai

    (Sirindhorn International Institute of Technology, School of Civil Engineering and Technology, Thammasat University, Pathum Thani 12120, Thailand)

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.

Suggested Citation

  • Korrakot Phomsoda & Nattapong Puttanapong & Mongkut Piantanakulchai, 2021. "Assessing Economic Impacts of Thailand’s Fiscal Reallocation between Biofuel Subsidy and Transportation Investment: Application of Recursive Dynamic General Equilibrium Model," Energies, MDPI, vol. 14(14), pages 1-32, July.
    • Handle: RePEc:gam:jeners:v:14:y:2021:i:14:p:4248-:d:594128
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