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Regional Computable General Equilibrium Model of Japan and the Global Economy

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  • Ken Itakura
  • Tomohiro Iwamoto

Abstract

There has been growing interest in sub-national economic impact of mega-FTAs (Free Trade Agreements). Our aim is to explore the linkages between sub-national regions in a country and the global economy. We incorporates sub-national regions(prefectures) in Japan to a global computable general equilibrium (CGE) model. Pre-fectures are introduced to the Global Trade Analysis Project (GTAP) database (Aguiar et al., 2019), and the comparative static GTAP model (Hertel, 1997; McDougall, 2003; Corong et al., 2017). Input-Output (IO) table from each prefecture is used to database construction. In the modified model, domestic inflows and outflows of goods and services in Japan are introduced. To illustrate sub-national impact of mega-FTA, we experiment a set of trade liberalization scenarios. Results reveals that all prefectures in Japan gains from the liberalized trade in terms of the positive impact on economic welfare. In contrast, results on real gross regional product (GRP) of prefecture are mixed in effect where some prefectures gain and some lose. As the parameter value of substitution of domestic trade among prefectures increases, the real GDP in Japan tends to decrease while economic welfare slightly increases.

Suggested Citation

  • Ken Itakura & Tomohiro Iwamoto, 2024. "Regional Computable General Equilibrium Model of Japan and the Global Economy," TUPD Discussion Papers 61, Graduate School of Economics and Management, Tohoku University.
    • Handle: RePEc:toh:tupdaa:61
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    References listed on IDEAS

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