Conference paper

Description

Under recent budget cuts for public investment, most public facilities including irrigation and drainage facilities become aging and deteriorating, and will negatively affect productivity in Japan. To evaluate macroeconomic effect of changes in public facilities, the current study uses the recursive dynamic computable general equilibrium (CGE) model. This model considers endogenous technological progress changed by the agricultural land improvement projects and road construction projects. The simulation results demonstrated that a decrease in agricultural public facilities causes negative effects of agricultural production as well as Japanese gross regional production (GDP) via changes in prices. Decreased labour and capital stocks in agricultural sector shift to other industries and improve their production, so such shift eases changes in agricultural production. Public capital stocks in roads continue to increase but marginal increase rate will decrease and will diminish an increase rate of production. Maintaining public capital stocks by any counter measures is highly needed for sustainable growth of economy. Different policies on budget source for such measures result in different economic effect, so a CGE model can help decision makers to consider comprehensive effects of policies.

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Published year only: 
2014
8
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