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Modelling major projects: What are the factors that determine net social benefits?

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  • James A Giesecke
  • John R Madden

Abstract

Economic impact statements are part and parcel of project proponents seeking government assistance, infrastructure, or environmental clearance. Such impact assessments are increasingly being conducted with computable general equilibrium (CGE) models. Frequently, however, CGE modellers do not report results in economic welfare terms nor give sufficient attention to the proper simulation requirements for determining net social benefits correctly. In this paper we take the example of a major mining project in the Western Australian region and model it under a variety of stylized scenarios in order to demonstrate the key determinants of an economic welfare measure, gross national disposable income (GNDI). We show that GNDI is sensitive to such factors as: terms of trade effects; profitability; public concessions and infrastructure; cost of foreign financing; and taxation of foreign-owned returns.

Suggested Citation

  • James A Giesecke & John R Madden, 2009. "Modelling major projects: What are the factors that determine net social benefits?," Centre of Policy Studies/IMPACT Centre Working Papers g-185, Victoria University, Centre of Policy Studies/IMPACT Centre.
    • Handle: RePEc:cop:wpaper:g-185
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    References listed on IDEAS

    as
    1. 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.
    2. Naqvi, Farzana & Peter, Matthew W, 1996. "A Multiregional, Multisectoral Model of the Australian Economy with an Illustrative Application," Australian Economic Papers, Wiley Blackwell, vol. 35(66), pages 94-113, June.
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    Keywords

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    JEL classification:

    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
    • Q33 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Resource Booms (Dutch Disease)
    • Q38 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Government Policy (includes OPEC Policy)

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