Economic Analysis Series No.159
Development of a Japanese AGE model for Analysis of Regulatory Reform

January, 2000
Kanemi Ban
(Professor, Graduate School of Economics, Osaka University;
Senior Visiting Fellow, Economic Research Institute, Economic Planning Agency)
Sigeru Ohtsubo
(Assistant Professor, Graduate School of International Development, Nagoya University;
Visiting Fellow, Economic Research Institute, Economic Planning Agency)
Minoru Ono
(Research Fellow, Economic Research Institute, Economic Planning Agency)
Mantarou Matsuya
(Economic Research Institute, Economic Planning Agency)
Shin_ichi Yamaguchi
(Economic Research Institute, Economic Planning Agency)

The full text is written in Japanese.

(Abstract)

Economic structural reform such as deregulation is one important policy for the Japanese economy. Throughout the 1990s, when economic growth had slowed down, various industries began to look for ways to correct the expensive nature of their cost structures and to seek new business opportunities in the domestic market. The government continues to encourage regulatory reform by such means as the Deregulation Action Program. For these government policies, it is essential to grasp quantitatively the effects of various measures on the economy and to present them clearly to the public in order to deepen the awareness and understanding of the people.

In considering the economic effects of regulatory reform, one must look at the effects in individual industries. However, it is quite possible that changes in one market influence other markets through changes in relative prices and in the distribution of the primary factors. Hence, to understand the effects on the entire economy, one must also look at the influence on other markets. Our research has begun with this concept - an attempt to measure the economic effects of regulatory reform by using some kind of AGE models capable of reflecting these phenomena.

In this paper, the main purpose is to provide an analytical tool that can be used to analyze regulatory reform; that is, to construct such an AGE model and to show its usability.

In the process of developing a new Japanese model, we took the following three points into consideration: (1) encompassing the industries targeted for regulatory reform in Japan; (2) corresponding to the analysis with the GTAP model, which is used as a global model to examine the ripple effects in other regions; and (3) simulating the phenomena resulting from regulatory reform as much as possible. As a result of these considerations, we developed a new model for Japan based on Australia's ORANl-G model. By using this model, we tried some simulations on changes in industrial activities, changes in consumer behavior, and changes in the labor market.

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