Assessing the Economic Impact of Agricultural Exports on the Washington Economy
Principal Investigator |
Dr. David Holland |
Completion Date |
December 31, 2007 |
Mission |
Examine the economic impact of alternative trade policies on agricultural exports in Washington State. |
Problem Addressed
The primary drawback in extending CGE analysis to the regional level has been the lack of regional data. However, the development of the IMPLAN database (Minnesota IMPLAN Group, 1999) and, more recently, of regional social accounting matrices (SAMs) has provided the data structure and facilitated the construction of regional CGE models.
Goal
By developing a general equilibrium economic simulation models (CGE) for the Washington economy (WAGEM) Holland examined the economic impact of alternative trade policies on agricultural exports in Washington and the ripple effect of these policies on the broader economy and the distribution of household income in Washington.
Implications
As a result of successful completion of this project, the IMPACT Center possesses a quantitative economic computer model of the Washington economy that can be used to assess a wide range of agricultural and food policies, as well as the impact of exogenous shocks on productivity and international market conditions. Furthermore, the model will be easily updated.
Procedures
Holland is utilizing the IMPLAN data as the basis for model construction, with the GAMS code developed to facilitate the manipulation of IMPLAN data into a social accounting matrix that is then used to parameterize the equations in the general equilibrium model.
The first study conducted using Holland’s CGE model involved
the possible impact of the outbreak of BSE in the United States.
The analysis was conducted for both the national economy and the
Idaho and Washington economies. The state level analysis was conducted
by using price effects from the national analysis as exogenous price
effects in the state models and alternative state level export and
consumer demand shifts as well.
The second study utilizing a sixteen-sector CGE model of the Washington economy, analyzed the effects of the tariff on Canadian softwood lumber imposed in May 2002. Model results indicated that the tariff generates a 0.5 percent increase in Washington lumber output. Lumber imports from Canada declined by 26 percent, while the rest of the U.S. lumber imports from Washington State increased by 5 percent. This illustrates an important distinction between national and regional trade policy analysis. At the state level there are opportunities to substitute imports from the rest of the United States for taxed foreign imports and thus moderate the negative economic impact of lumber tariff.
Just as the lumber industry is advantaged by the tariff, the lumber using industries are damaged by the tariff. Counterfactual output reductions ranged between 0.5 percent and 1.5 percent in the downstream industries. On balance, once the Washington economy adjusted to a new equilibrium, the predicted change in gross state product was a very modest loss of roughly 0.002 percent.
Publications/Journal Articles From Project
Devadoss, Stephen, David Holland, Leroy Stodick and Joydeep Ghosh. “The Effects of Mad Cow Disease Discovery on the U.S. Cattle and Beef Industry.” Paper submitted to the Journal of Agricultural and Resource Economics.2004.
Ghosh, Joydeep, David W Holland, Thomas Heckelei, Stephen Devadoss and Leroy Stodick. “A General Equilibrium Analysis of the Economic Impact of the Canadian Softwood Lumber Tariff on the Washington Economy.” Paper revised and re-submitted to the Northwest Journal of Business and Economics. 2004.