2015年-世界发展银行全球_Georgia___Assessing_Economy_Wide_Indirect_Impacts_of_East-West_Highway_Investments_through_CGE_Modeling_40页_832kb

Summary of "Assessing Economy Wide Indirect Impacts of East-West Highway Investments through CGE Modeling"

Core Content

This report evaluates the economy-wide indirect impacts of investments in the East-West Highway (EWH) in Georgia using a Computable General Equilibrium (CGE) model. The focus is on the macroeconomic and welfare effects of reduced transportation costs and improved connectivity, excluding the direct impacts of civil works.

Key Objectives

• To assess the indirect economic benefits of the EWH investment program.
• To evaluate the impact on real GDP growth, employment, trade, and household income.
• To determine whether the EWH can bridge the economic divide between rural and urban areas.

Main Findings

Macroeconomic Impacts

• Real GDP is expected to increase by 1.5% over the medium-term and 4.2% over the long-term.
• Real household consumption is projected to rise by 1.5% in the medium-term and 4.4% in the long-term.
• Real government consumption is expected to increase by 0.7% in the medium-term and 1.1% in the long-term.
• Exports are expected to grow by 4.7% in the long-term, while imports will increase by 1.6%.
• Unemployment is projected to decrease by 2.8% in the medium-term and 4.4% in the long-term.

Distributional Impacts

• All household income quintiles experience positive income changes, with the first quintile (lowest income) gaining 1.8% in the medium-term and 2.6% in the long-term.
• The fifth quintile (highest income) gains 2.8% in the medium-term and 4.4% in the long-term.
• Rural households are expected to gain more than urban households, aligning with a priori expectations.

Methodology

• The study uses a CGE model to simulate the indirect benefits of the EWH, focusing on reduction in transportation costs and time savings.
• The model excludes direct impacts of civil works, which would have large effects on real GDP and employment.
• Two versions of the model were used:
  • Comparative static model (medium-term)
  • Comparative steady-state model (long-term)

Model Description

• The model is based on a Social Accounting Matrix (SAM), which captures economic interactions between sectors and households.
• The SAM includes 15 activities, 15 commodities, and two types of household groups (5 by income level, 20 by region and residence).
• The model uses constant elasticity of substitution (CES) functions for production and consumption, assuming full mobility of capital and labor.
• It is a static single-country model, which does not account for spatial or dynamic effects, and thus the results are treated as lower bounds.

EWH Overview

• The EWH is a key transit route in the Caucasus Transit Corridor (CTC), part of the TRACECA project.
• It connects Azerbaijan to Georgia's Black Sea port, covering 392 km.
• The EWH carries over 60% of Georgia's foreign trade.
• The total estimated cost of upgrading the EWH is USD 2.265 billion, equivalent to 13.7% of Georgia's GDP in 2014.
• The World Bank has financed four road improvement projects along the EWH, with additional support from ADB, EIB, and JICA.
• As of the report, 130 km of the EWH has been upgraded, with 177 km remaining to be completed by 2015.

Limitations and Considerations

• The CGE model is a simplified representation of the real economy and only reflects approximations based on assumptions and data.
• The results are sensitive to exogenous parameters, equation structure, and SAM specification.
• The model does not account for spatial or dynamic effects, and thus the impacts are considered lower bounds.
• The study is intended to inform policy decisions and may lead to model modifications in a potential second phase.

Conclusion

• The indirect benefits of the EWH investment program are positive and significant for the Georgian economy.
• The model results suggest that the reduction in transportation costs will lead to increased economic activity, welfare improvements, and reduced unemployment.
• The EWH has the potential to bridge the economic divide between rural and urban areas, with rural households benefiting more than urban households.
• The study provides a foundation for future analysis and policy recommendations related to the EWH and its broader economic implications.