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Comments on the Productivity Commission’s Modelling of the Economy‐Wide Effects of Future Automotive Assistance

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  • Peter B. Dixon

Abstract

The Productivity Commission claims on the basis of computable general equilibrium modelling that a seemingly small reduction in assistance to the Australian Automotive industry (a cut in tariffs from 10 per cent to 5 per cent and elimination of the ACIS scheme) would generate an annual welfare benefit of about $500 million. I explain that this implausible result rests on an implicit manna‐from‐heaven assumption. Using results published by the Commission, I rework their welfare calculations. With parameter values favoured by them, the corrected annual welfare gain is $66 million. With what I consider more realistic parameter values, the welfare effect is negative.

Suggested Citation

  • Peter B. Dixon, 2009. "Comments on the Productivity Commission’s Modelling of the Economy‐Wide Effects of Future Automotive Assistance," Economic Papers, The Economic Society of Australia, vol. 28(1), pages 11-18, March.
    • Handle: RePEc:bla:econpa:v:28:y:2009:i:1:p:11-18
    DOI: 10.1111/j.1759-3441.2009.00004.x
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    References listed on IDEAS

    as
    1. Productivity Commission, 2008. "Modelling Economy-wide Effects of Future TCF Assistance," Research Reports, Productivity Commission, Government of Australia, number 31.
    2. Productivity Commission, 2008. "Modelling Economy-wide Effects of Future Automotive Assistance," Research Reports, Productivity Commission, Government of Australia, number 30.
    3. Robert Dixon & John Freebairn & G.C. Lim, 2005. "An Employment Equation for Australia," The Economic Record, The Economic Society of Australia, vol. 81(254), pages 204-214, September.
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    Cited by:

    1. Giesecke, James A. & Madden, John R., 2013. "Regional Computable General Equilibrium Modeling," Handbook of Computable General Equilibrium Modeling, in: Peter B. Dixon & Dale Jorgenson (ed.), Handbook of Computable General Equilibrium Modeling, edition 1, volume 1, chapter 0, pages 379-475, Elsevier.
    2. MASSIANI, Jérôme, 2022. "Computable General Equilibrium assessment of mega-events: Issues and possible solutions," Journal of Policy Modeling, Elsevier, vol. 44(5), pages 920-942.
    3. Forsyth, Peter & Dwyer, Larry & Spurr, Ray & Pham, Tien, 2014. "The impacts of Australia's departure tax: Tourism versus the economy?," Tourism Management, Elsevier, vol. 40(C), pages 126-136.
    4. Ballingall, John & Giesecke, James & Zuccollo, James, 2010. "Tariffs in New Zealand," NZIER Working Paper 2010/1, New Zealand Institute of Economic Research.
    5. Dixon, Peter B. & Rimmer, Maureen T., 2013. "Validation in Computable General Equilibrium Modeling," Handbook of Computable General Equilibrium Modeling, in: Peter B. Dixon & Dale Jorgenson (ed.), Handbook of Computable General Equilibrium Modeling, edition 1, volume 1, chapter 0, pages 1271-1330, Elsevier.
    6. Gordon Menzies & Ron Bird & Peter B. Dixon & Maureen T. Rimmer, 2011. "Asset Price Regulators, Unite: You have the Macroeconomy to Win and the Microeconomic Losses are Small," The Economic Record, The Economic Society of Australia, vol. 87(278), pages 449-464, September.

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