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Targeting Regional Output with State Government Fiscal Instruments: a Dynamic Multi‐regional CGE Analysis

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  • James Giesecke

Abstract

Between 1986/87 and 1998/99, Tasmania's share of national output declined from approximately 2.3 per cent to 1.9 per cent. At least two forecasters have projected that Tasmania's share of national activity will continue to decline over the period 1999/00 to 2003/04, falling to 1.7 per cent of national activity by the end of this period. This paper investigates whether it is within the power of the Tasmanian government to influence materially this forecast outcome by means of a budget neutral tax policy. Two such policy packages are investigated using a dynamic two‐region CGE model of the Australian economy (FEDERAL‐F). In the first, the question asked is whether there exists a feasible re‐arrangement of the Tasmanian government's revenue raising effort which has the effect of maintaining, over the forecast period, Tasmania's share of national GDP at its 1998/99 level. This is found not to be so. Hence, a second and (comparatively) less ambitious policy is then considered. This involves the gradual but complete elimination of payroll tax over the forecast period, and its replacement with a direct tax on households. Even when such a dramatic tax change as this is considered, the impact on the forecast for Tasmania's share of national activity is not large.

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  • James Giesecke, 2003. "Targeting Regional Output with State Government Fiscal Instruments: a Dynamic Multi‐regional CGE Analysis," Australian Economic Papers, Wiley Blackwell, vol. 42(2), pages 214-233, June.
    • Handle: RePEc:bla:ausecp:v:42:y:2003:i:2:p:214-233
    DOI: 10.1111/1467-8454.00196
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    References listed on IDEAS

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    1. W. Jill Harrison & J. Mark Horridge & K.R. Pearson, 2000. "Decomposing Simulation Results with Respect to Exogenous Shocks," Computational Economics, Springer;Society for Computational Economics, vol. 15(3), pages 227-249, June.
    2. Unknown, 1999. "Impact of Competition Policy Reforms on Rural and Regional Australia," Inquiry Reports 31892, Productivity Commission.
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    1. Jeffrey Condon & Andrew Feltenstein & Florenz Plassman & Mark Rider & David L. Sjoquist, 2014. "A Regional Model of Growth Oriented Fiscal Policy: An Application to Georgia and Its Competitor States," The Review of Regional Studies, Southern Regional Science Association, vol. 44(2), pages 177-209, Summer.
    2. James A. Giesecke & John R. Madden, 2013. "Evidence-based regional economic policy analysis: the role of CGE modelling," Cambridge Journal of Regions, Economy and Society, Cambridge Political Economy Society, vol. 6(2), pages 285-301.
    3. Ahmed, Vaqar, 2006. "Regional economic modelling: evaluating existing methods and models for constructing an Irish prototype," MPRA Paper 7650, University Library of Munich, Germany.
    4. Giesecke, James A. & Madden, John R., 2013. "Regional Computable General Equilibrium Modeling," Handbook of Computable General Equilibrium Modeling, in: Peter B. Dixon & Dale Jorgenson (ed.), Handbook of Computable General Equilibrium Modeling, edition 1, volume 1, chapter 0, pages 379-475, Elsevier.
    5. Mark Partridge & Dan Rickman, 2010. "Computable General Equilibrium (CGE) Modelling for Regional Economic Development Analysis," Regional Studies, Taylor & Francis Journals, vol. 44(10), pages 1311-1328.
    6. James Giesecke & John R. Madden, 2003. "Regional Labour Market Adjustment to Competition Policy Reforms: A Dynamic CGE Framework for Assessment," Australian Journal of Labour Economics (AJLE), Bankwest Curtin Economics Centre (BCEC), Curtin Business School, vol. 6(3), pages 409-433, September.
    7. repec:hrs:journl::v:3:y:2011:i:2:p:13-25 is not listed on IDEAS

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