14 Forecast of Future Impacts of Using ICT …
209
14.2 Estimation Method
A computable general equilibrium (CGE) model replicates the Input-Output (IO)
Tables in a given region as a set of simultaneous equations, and usually covers all
goods and industry sectors in the evaluated region. The dynamic CGE model we adopt
in this paper is based on the AIM/CGE [Japan] of the Asia-Pacific Integrated Model
(Fujimori et al. 2012). The goods in our dynamic CGE model are disaggregated
into 40 commodities, and elasticity production is disaggregated into 9 technologies.
Under the economic balance, levels of activity in each sector and prices for all goods,
services, and production factors are determined by a price mechanism. The equations
also include a set of constraints that have to be satisfied by the system as a whole
but are not necessarily considered by any individual actor, namely macro-economic
balance. Commodities can be referred to the horizontal axis in Fig. 14.5 and equations
used in our model can be referred to reference (Masui et al. 2003). In this model, the
final demand sector (households) holds the production factors of capital and labor,
which are provided to the producing sectors in exchange for income. The income
received is applied to purchasing consumer goods and saving. Households maximize
their utility in purchasing consumer goods. Saving is converted into capital in the
next period. Producing sectors (enterprises) use production factors and intermediate
inputs (e.g., energy and raw materials) to produce products and supply them to
the market. In doing so, enterprises conduct production activities to maximize their
profits on the basis of their production technologies. The supply and demand for
goods and production factors are balanced in the market, and levels of activities and
the value of goods, services, and production factors are determined through the price
mechanism.
When ICT services are introduced into producing sectors and final demand
sectors, production efficiency in producing sectors and consumption efficiency in
final demand sectors are expected to be improved. It means that intermediate inputs
in various sectors could be reduced, and the related market would be temporarily out
of equilibrium. Then the dynamic CGE model can balance the demand and supply in
each sector on the basis of a price mechanism for each good and production factor.
The structure of the CGE model is shown in Fig. 14.1.
The dynamic CGE model in this paper is extended on the basis of the static CGE
model in reference (Origuchi et al. 2017). The model calibrated coefficients with
the IO Tables in the base year, 2005 (Masui et al. 2003). Equilibrium calculation
starts from 2005, and then capital stock in the next year 2006 is decided by capital
stock, depreciation, and investment in 2005. Efficiency levels in 2006, such as energy
efficiency, are calculated depending on the technology levels of existing capital stock
and new capital investment. Then equilibrium solutions in 2006 will be calculated
on the basis of the prepared efficiency levels, and the model will run year by year like
this. Furthermore, the relationship between fixed capital formation and capital stock
is assumed as putty-clay. That means new capital can be introduced in any sector but
cannot be changed once introduced. Allocation of the new capital is endogenously
decided to achieve the maximum profit in the equilibrium calculation. Figure 14.2
209
14.2 Estimation Method
A computable general equilibrium (CGE) model replicates the Input-Output (IO)
Tables in a given region as a set of simultaneous equations, and usually covers all
goods and industry sectors in the evaluated region. The dynamic CGE model we adopt
in this paper is based on the AIM/CGE [Japan] of the Asia-Pacific Integrated Model
(Fujimori et al. 2012). The goods in our dynamic CGE model are disaggregated
into 40 commodities, and elasticity production is disaggregated into 9 technologies.
Under the economic balance, levels of activity in each sector and prices for all goods,
services, and production factors are determined by a price mechanism. The equations
also include a set of constraints that have to be satisfied by the system as a whole
but are not necessarily considered by any individual actor, namely macro-economic
balance. Commodities can be referred to the horizontal axis in Fig. 14.5 and equations
used in our model can be referred to reference (Masui et al. 2003). In this model, the
final demand sector (households) holds the production factors of capital and labor,
which are provided to the producing sectors in exchange for income. The income
received is applied to purchasing consumer goods and saving. Households maximize
their utility in purchasing consumer goods. Saving is converted into capital in the
next period. Producing sectors (enterprises) use production factors and intermediate
inputs (e.g., energy and raw materials) to produce products and supply them to
the market. In doing so, enterprises conduct production activities to maximize their
profits on the basis of their production technologies. The supply and demand for
goods and production factors are balanced in the market, and levels of activities and
the value of goods, services, and production factors are determined through the price
mechanism.
When ICT services are introduced into producing sectors and final demand
sectors, production efficiency in producing sectors and consumption efficiency in
final demand sectors are expected to be improved. It means that intermediate inputs
in various sectors could be reduced, and the related market would be temporarily out
of equilibrium. Then the dynamic CGE model can balance the demand and supply in
each sector on the basis of a price mechanism for each good and production factor.
The structure of the CGE model is shown in Fig. 14.1.
The dynamic CGE model in this paper is extended on the basis of the static CGE
model in reference (Origuchi et al. 2017). The model calibrated coefficients with
the IO Tables in the base year, 2005 (Masui et al. 2003). Equilibrium calculation
starts from 2005, and then capital stock in the next year 2006 is decided by capital
stock, depreciation, and investment in 2005. Efficiency levels in 2006, such as energy
efficiency, are calculated depending on the technology levels of existing capital stock
and new capital investment. Then equilibrium solutions in 2006 will be calculated
on the basis of the prepared efficiency levels, and the model will run year by year like
this. Furthermore, the relationship between fixed capital formation and capital stock
is assumed as putty-clay. That means new capital can be introduced in any sector but
cannot be changed once introduced. Allocation of the new capital is endogenously
decided to achieve the maximum profit in the equilibrium calculation. Figure 14.2