Three essays on multiregional applied general equilibrium modelling

In this thesis three policy issues that are of particular relevance in the economic debate are analysed using multiregional CGE models. The first of these issues is related to the welfare effects of the decentralised provision of quasi-private goods by the government. The second issue refers to the exportation of domestic taxes from developed to developing countries. And, the third issue is related to the efficiency gains from the elimination of global restrictions on international labour mobility. Two types of multiregional CGE models can be distinguished. The first type of models disaggregates the national economy into regions, whereas in the second type, regions consist of countries or groups of countries. In this thesis both types of models are used. Chapter 2 quantifies the welfare effects of decentralisation in Colombia, using a multiregional CGE model. The purpose of this chapter is to investigate to what extent will the Colombian population be better off when goods such as health and education, are delivered locally as against centrally. A provision scheme based on the median voter is considered. Neither multiregional CGE models nor schemes for public provision of quasi-private goods have been previously applied when assessing the effects of decentralisation. According to the results, the provision of health and education by regional governments improves the welfare of the Colombian population as a whole, since regional governments provide goods and services in a way that better caters to local preferences. More importantly, these welfare gains vary from 1.3% to 2.3% of GDP, a substantial magnitude especially when compared with the efficiency gains associated to the tax reforms of the early nineties. Chapter 3 investigates whether developed countries export taxes to developing countries, contributing to the deterioration of their terms of trade and welfare; that is to what extent the distribution of gains from trade is being affected not by existing tariffs in developed countries, which are already at low levels, but by their domestic taxation. An eight-region CGE model for the world economy is used. The results indicate that when factors of production are internationally immobile, developed regions do not export domestic taxes to developing regions. On the contrary, when capital is assumed to be internationally mobile developed region export capital taxes to developing regions. Regardless of the assumptions on international capital mobility, the effects of import tariffs on welfare and terms of trade are larger than those of domestic taxes. Chapter 4 computes the world-wide efficiency gains from the elimination of global restrictions on labour mobility using an eight-region CGE model. A distinctive feature of the analysis is the introduction of a segmented labour market, as two types of labour are considered: skilled and unskilled. According to the results, when labour is a homogeneous factor, the elimination of global restrictions on labour mobility generates world-wide efficiency gains that could be of considerable magnitude. When the labour market is segmented and both skilled and unskilled labour migrate, welfare gains reduce since the benefits and losses of migration are not evenly distributed within each region. When only skilled labour migrates, the world-wide efficiency gains are smaller, since this type of labour represents a small fraction of the labour force in developing regions