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Do Small Town Development Projects Matter, and Can CGE Help?

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  • Hannu Törmä

Abstract

Abstract Small regions and towns often experience problems such as high out-migration and unemployment. In these situations there is an urgent need to do something positive. Infrastructure development projects, partially financed by the national government, are a popular suggestion. We ponder the relevance of these actions in this paper in a context of project evaluation. We introduce computable general equilibrium (CGE) modelling as a complement of the other quantitative evaluation techniques. We will use the town of Lapua in South Ostrobothnia, Finland, which is planning to implement two large-scale infrastructure projects, as an example. Our simulation tool is the Finnish multi-sector and interregional CGE RegFin model. We consider the regional short-run effects of the construction phase, the long-run effects of new business activity and the so-called secondary effects based on the commuting and trade patterns of the households.

Suggested Citation

  • Hannu Törmä, 2008. "Do Small Town Development Projects Matter, and Can CGE Help?," Spatial Economic Analysis, Taylor & Francis Journals, vol. 3(2), pages 247-268.
  • Handle: RePEc:taf:specan:v:3:y:2008:i:2:p:247-268
    DOI: 10.1080/17421770801996698
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    References listed on IDEAS

    as
    1. Törmä, Hannu & Rutherford, Thomas, 1993. "Integrating Finnish Agriculture into EC," Research Reports 13, VATT Institute for Economic Research.
    2. Jones, Rich & Whalley, John, 1989. "A Canadian regional general equilibrium model and some applications," Journal of Urban Economics, Elsevier, vol. 25(3), pages 368-404, May.
    3. Törmä, Hannu & Rutherford, Thomas & Vaittinen, Risto, 1995. "What Will EU Membership and the Value-Added Tax Reform Do to Finnish Food Economy? - A Computable General Equilibrium Analysis," Discussion Papers 88, VATT Institute for Economic Research.
    4. Mark D. Partridge & Dan S. Rickman, 1998. "Regional Computable General Equilibrium Modeling: A Survey and Critical Appraisal," International Regional Science Review, , vol. 21(3), pages 205-248, December.
    5. Valkonen, Tarmo, 2002. "Demographic Uncertainty and Taxes," Discussion Papers 816, The Research Institute of the Finnish Economy.
    6. Vaittinen, Risto, 2004. "Trade Policies and Integration - Evaluations with CGE Models," Research Reports 109, VATT Institute for Economic Research.
    7. Matthew W. Peter & Mark Horridge & G.A.Meagher & Fazana Naqvi & B.R.Parmenter, 1996. "The Theoretical Structure of MONASH-MRF," Centre of Policy Studies/IMPACT Centre Working Papers op-85, Victoria University, Centre of Policy Studies/IMPACT Centre.
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    More about this item

    Keywords

    Infrastructure investment; quantitative project evaluation techniques; CGE RegFin regional model; macro and employment multiplier effects; C68; R11; R13;

    JEL classification:

    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes
    • R13 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General Equilibrium and Welfare Economic Analysis of Regional Economies

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