Asset Management Of Public Facilities In An Era
Of Climate Change: Application Of The Dynamic
Computable General Equilibrium Model
Author(s)
Y. Kunimitsu
Abstract
Agricultural production depends heavily on climate conditions; therefore,
climatic uncertainty caused by global warming represents a significant threat not
only to agriculture but also to entire economies. Furthermore, the drastic budget
cuts after 2001 in Japan have reduced public capital stock and have placed the
production capacities of various industries in jeopardy. This highlights the need
for asset management to prolong the structural integrity of facilities. The present
study uses the recursive dynamic computable general equilibrium (CGE) model
to evaluate asset management measures (namely, those focusing on reinforcing
old facilities) in the context of climatic uncertainty. Simulation results showed
that the uncertainty of production induced by climate change is amplified
through the market mechanism. The variation in the total production was much
wider than the variation in agricultural production originally affected by the
climate change. The public capital stock maintained by the asset management
measures can ease such uncertainty. Therefore, asset management policy, which
makes the deficit minimal leeway for increasing public investment, is critical in
Japan. The dynamic CGE model can also measure such long-term
comprehensive effects and is useful for policy analysis.
Keywords: computable general equilibrium model, recursive dynamic model,
asset management measures, public investment, public capital stocks, Hicksian
equivalent variation.
Keywords
computable general equilibrium model, recursive dynamic model,
asset management measures, public investment, public capital stocks, Hicksian
equivalent variation.
Related Book
Other papers in this volume
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