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A General Equilibrium Evaluation of Aggregate Welfare Effects from Improved Sectoral Efficiency . Empirical Evidence for Norway

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Abstract

This paper discusses and shows how a CGE model can be used to assess welfare effects of structural policy reforms targeting inefficiency problems at micro levels that normally are not captured in operational CGE-models. The CGE approach allows computation of shadow prices which are generally both unobservable due to various price distortions, and endogenous. Moreover, the paper discusses how static measures of sectoral inefficiency can be implemented in a CGE-model that accounts for real world dynamics. Results from CGE-simulations suggest that general equilibrium effects have substantial influence on welfare, at least when the initial waste of resources is as large as reported in sector studies for Norway. More precisely, compared to the CGE-estimate a partial equilibrium approach overestimates the welfare gain by more than 30 percent.

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  • Erling Holmøy, 1998. "A General Equilibrium Evaluation of Aggregate Welfare Effects from Improved Sectoral Efficiency . Empirical Evidence for Norway," Discussion Papers 224, Statistics Norway, Research Department.
    • Handle: RePEc:ssb:dispap:224
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    1. Turnovsky, Stephen J., 1991. "Tariffs and sectoral adjustments in an open economy," Journal of Economic Dynamics and Control, Elsevier, vol. 15(1), pages 53-89.
    2. Holmoy, Erling & Vennemo, Haakon, 1995. "A general equilibrium assessment of a suggested reform in capital income taxation," Journal of Policy Modeling, Elsevier, vol. 17(6), pages 531-556, December.
    3. Aasness, Jorgen & Biorn, Erik & Skjerpen, Terje, 1993. "Engel Functions, Panel Data, and Latent Variables," Econometrica, Econometric Society, vol. 61(6), pages 1395-1422, November.
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    More about this item

    Keywords

    Structural reform; Efficiency gains; General equilibrium effects;
    All these keywords.

    JEL classification:

    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • C81 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Methodology for Collecting, Estimating, and Organizing Microeconomic Data; Data Access
    • H50 - Public Economics - - National Government Expenditures and Related Policies - - - General
    • L70 - Industrial Organization - - Industry Studies: Primary Products and Construction - - - General
    • L98 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Government Policy

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