Geoscience Reference
In-Depth Information
Because most of the elasticities of substitution for general equilibrium analysis
are exogenously provided, many CGE models retrieve the values from relevant
literature that specifically focuses on elasticity estimation (Balistreri et al.
2003
;
Chirinko et al.
2004
). However, a careful search of their sources show that all the
elasticities of substitution are obtained through the method of econometric esti-
mation, which usually requires substantial time series data or panel data to achieve
robust estimation. However, spatial dependence in the process of estimating the
elasticities of substitution has never been addressed, even though the data used for
these estimations has a spatial perspective and may imply the existence of such an
issue.
Anselin and Griffith (
1988
) indicate that spatial dependence matters in econo-
metric estimation because ignoring such an issue may lead to serious estimation
error. Most of the existing CGE analyses only rely on the elasticities of substitution
from non-spatial econometric estimation, in other words, only the intraregional
elasticity of substitution is considered. However, the interpretation of the new
economic geography theory suggests that interregional activities on the elasticity
of substitution may also exist. Limitations that occur due to omitting potential
spatial dependence are likely to lead to negative consequences on policy impact
analyses.
To address the issue of spatial dependence under general equilibrium frame-
work, a new approach that integrates both spatial econometric estimation and CGE
is needed. In addition, the lack of a multimodal perspective limits our
understandings of the spatial impacts of transportation infrastructure, particularly
in counties like the US where multiple modes of transportation infrastructure are
comprehensively, competitively and maturely established. To fill the gaps in the
literature, this study is conducted to answer the following questions:
• How does public transportation infrastructure contribute to economic outputs in
the US under general equilibrium analysis?
• How do impacts vary among different modes of transportation including road,
air, water and transit?
• Does the impact differ when comparing the estimation with and without
consideration of spatial dependence in a CGE context?
10.4
CGE Structure
For demonstration purpose, this study adopts an edited version of a single country
and static CGE model in the tradition of the
IFPRI
standard model, or the Dervis-
DeMelo-Robinson tradition developed by McDonald (
2005
). An earlier application
of this model to transportation infrastructure can be found in Chen and Haynes
(
2014
). The model is an open economy including 13 commodities, 13 activities,
9 factors, 1 household and 1 rest of world account (ROW). Trade is modeled under
the Armington assumption of imperfect substitution between domestically produced
and imported goods, represented by a one level CES function (Armington
1969
). In
addition, exports are assumed to be imperfect substitutes for domestically produced
