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General Equilibrium Planning of Road Sector Investment Programs in Ghana

General Equilibrium Planning of Road Sector Investment Programs in Ghana. Henning Tarp Jensen, PhD Institute of Food & Resource Economics University of Copenhagen SSATP Annual Meeting Lilongwe, Malawi 19-21 October, 2009. Terminology: Road expenditures. Types of road sector expenditures

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General Equilibrium Planning of Road Sector Investment Programs in Ghana

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  1. General Equilibrium Planning of Road Sector Investment Programs in Ghana Henning Tarp Jensen, PhD Institute of Food & Resource Economics University of Copenhagen SSATP Annual Meeting Lilongwe, Malawi 19-21 October, 2009

  2. Terminology: Road expenditures • Types of road sector expenditures • Existing roads • Recurrent maintenance • Capital road works (CRW) • New roads • Focus: Capital road works (CRW)

  3. Terminology: Road sector analyses • Types of road sector analyses • Road segments • Impact evaluation (Jensen 2009) • Road systems • Program planning • Focus: Program planning (road systems)

  4. Terminology: Analytical framework • Program planning • Partial equilibrium (PE) dynamic simulation models • Focus on 1st order effects of CRW • General equilibrium (GE) dynamic simulation models • Focus on 1st & 2nd order effects of CRW • Focus: GE dynamic planning model (CGE-RONET) • Based on RONET planning model (Archondo-Callao 2009)

  5. CGE-RONET: Advantages Account for key spillover effects • RONET planning model (PE) • 1st order effects (VOC savings) • CGE-RONET planning model (GE) • 1st order effects (VOC savings) • 2nd order effects • 2nd order effects in CGE-RONET • Increased transport sector productivity • Reduced transport costs (consumers) • Reduced marketing margins (producers) • Relative price changes (commodities) • Employment growth • Capital accumulation

  6. CGE-RONET: Advantages Focus on economy-wide policy outcome variables • RONET planning model • VOC costs + CRW costs = road user costs (outcome) • CGE-RONET planning model • VOC savings & CRW costs (input) • Economy-wide impact (outcome) • Economy-wide outcome variables in CGE-RONET • Household welfare • Household poverty • Labor Employment • Macroeconomic indicators (GDP, C, I, X, M) • Etc.

  7. CGE-RONET: Advantages Focus on key policy choice variables • Key policy choice variables: CRW timing & quality. • Overall policy decision criteria • Political CRW sequencing • E.g. industrial policy • E.g. regional development policy • Minimum road quality • CRW intervals • CRW quality

  8. CGE-RONET application: Variation in CRW intervals (years)

  9. CGE-RONET application: Variation in CRW quality – 4 year CRW intervals

  10. CGE-RONET application: Variation in CRW quality – 5 year CRW intervals

  11. Conclusion • Significant advantages of CGE-RONET • Account for economy-wide effects of Capital Road Works (CRW) • VOC savings & CRW costs (1st order effects) • Transport costs/marketing margins/relative prices (2nd order effects) • Employment/capital accumulation (2nd order effects) • Allow for key policy decision criteria • Political CRW sequencing • Minimum road quality • CRW intervals • CRW quality • Allow computation of key policy outcome variables • Welfare indicators • Poverty indicators • Employment indicators • Macroeconomic indicators

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