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Abstract

This paper investigates the effects of subnational regionalization on a country’s terms of trade, trade patterns, and its welfare. We show that a countrycan gain from dividing itself into two regions with different factor ratios. Making a region in a countryto have a comparative advantage different from the country as a whole cangenerate a welfare improving terms-of-trade effect. We also show that subnational regionalization can reduce thevolume of trade and or even reverse countries’ trade patterns. This explains theparadox between trade patterns predicted by the standard Heckscher-Ohlin model and those found empirically.

Abstract

Using a dynamic national computable general equilibrium model, we investigate the impact of carbon tax and energy efficiency improvement on the economy and environment of China. The Chinese social account matrix is presented based upon the latest input-output table (2012 IO table) and other data. The business as usual (BAU) scenario is designed according to several forecasts about China by 2030, followed by six policy scenarios, including different levels of carbon tax and technological progress as well as their combinations. The results show that carbon tax will frustrate the overall economic growth slightly. The CO2 emission will be 13.81% lower in 2030 compared to BAU case if the carbon tax scheme is carried out at at rate of 200 RMB/ton of CO2. Technological progress will stimulate the economic growth, enrich the household and government income, increase total investment and make most sectors prosperous with the exception of energy industries.