Building a computable general equilibium model (cge) on a regional sam: the case of Tuscany

This paper aims to provide an empirical framework for building a Computable General Equilibrium (CGE) model from a regional Social Accounting Matrices (SAM). It illustrates the case of TUSCANI, a single-region comparative-static CGE model of the Tuscan economy, built on the regional SAM, which is provided by IRPET (Institute for regional economic planning of Tuscany). The strict linkage between regional SAMs and CGE models is identified. First of all, a detailed overview of the structure of the regional SAM for Tuscany is provided. The circular flow of the economy, so well summarized by the SAM, is the framework at the core of the CGE model, and comes to represents the benchmark equilibrium of TUSCANI. Because of the inner relationship between the benchmark economy and the SAM data structure, the CGE theoretical model is adapted in order to reflect the SAM structure adopted by IRPET. In particular, together with the main theoretical features of a regional model, TUSCANI incorporates a detail on income generation and income re-distribution for the households institutional sector, by using data as shown in the SAM. In conclusion, this paper demonstrates the structure of a regional SAM suitable for constructing a computable general equilibrium model’s database, which provides a guideline for future applications