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Estimating the Economic Impact of Large Hydropower Projects: A Dynamic Multi-regional Computable General Equilibrium Analysis

Author

Listed:
  • Hongzhen Ni
  • Jing Zhao
  • Xiujian Peng
  • Glyn Wittwer
  • Genfa Chena

Abstract

This paper uses SinoTERM, a dynamic multi-regional computable general equilibrium model (CGE) of the Chinese economy, to analyze the economic impact of large hydropower development projects. The model features regional labor market dynamics and an electricity subdivision module with substitutability between various types of electricity generation. The results suggest that hydropower development will boost economic growth in the project region. Most sectors in the project region will benefit from the hydropower development while some sectors will suffer a loss in output because of the substantial increase in real wages. Neighboring regions also benefit as a result of increased electricity supply in the operational phase of the proposed hydropower station. The impact of the hydropower development project on the national GDP as a whole is relatively small although positive. However, because of the long lag between the construction and operational phases, the hydropower development project will result in a national welfare loss measured by real household consumption and net foreign liability. Therefore, the project could only be justified if net environmental benefits outweigh this loss.

Suggested Citation

  • Hongzhen Ni & Jing Zhao & Xiujian Peng & Glyn Wittwer & Genfa Chena, 2021. "Estimating the Economic Impact of Large Hydropower Projects: A Dynamic Multi-regional Computable General Equilibrium Analysis," Centre of Policy Studies/IMPACT Centre Working Papers g-320, Victoria University, Centre of Policy Studies/IMPACT Centre.
    • Handle: RePEc:cop:wpaper:g-320
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    More about this item

    Keywords

    dynamic CGE model; hydropower development; multiple regions; economic impacts; electricity subdivision module; China;
    All these keywords.

    JEL classification:

    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • R58 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Regional Development Planning and Policy

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