Abstract
This chapter measures the economic impact of the reconstruction budget and illustrates the transition of the regional economies in the disaster-affected region amid a declining population using a recursive dynamic regional CGE model. Our findings are as follows: Firstly, even if the Great East Japan Earthquake had not occurred, the disaster-affected region would have experienced weaker growth in its sub-regional economies owing to the impact of a declining population. Secondly, the fiscal measures in the intensive reconstruction period contribute toward recovering the real Gross Regional Product (GRP) of the disaster-affected region, which slumped following the Great East Japan Earthquake. But, the real GRP of the disaster-affected region begins to move downward after 2018. However, the fiscal measures would slow down the pace of curtailment of the regional economies in the disaster-affected region compared with the scenario without fiscal measures. Third, it is advisable that the government should provide fiscal measures to the disaster-affected region after the intensive reconstruction period by adopting a different form of reconstruction budget, that is, by revising the distribution ratios of the local allocation tax grants. However, this measure alone would not allow the regional economy in the disaster-affected region to recover and exceed the level prior to the earthquake. In order to realize sustained economic growth, it is necessary to take other measures after the intensive reconstruction period, such as productivity improvements in each industry located within the disaster-affected region, using fiscal transfers.
Keywords
This is a preview of subscription content, log in via an institution.
Notes
- 1.
The population forecast by the IPSS does not consider the movement of population caused by the Great East Japan Earthquake .
- 2.
Please refer to the Board of Audit (2015) concerning the results of the Cabinet Office ’s detailed estimations of the amount of damage to each institution and facility.
- 3.
Refer to Appendix 1 concerning the 2SCGE model.
- 4.
The method of adding a recursive dynamic dimension to the model is largely based on the GAMS code of Recursive Dynamics provided by EcoMod Modeling School (2012). We would like to note our appreciation.
- 5.
We estimate that each rate of change in labor endowment from 2005 to 2010 declines by 0.2% for the disaster-affected region and increases by 1.9% for the non-disaster region using the 2005 and 2010 population census of Japan. Though we cannot estimate the rates of change in capital endowment for two regions on the basis of any survey data, we can calculate those rates in the process of our simulations in order to reproduce the real GRP of 2010.
- 6.
Square root means the elasticity of the return to capital to investment demand.
- 7.
We took the wage rate for one of the two regions as the numeraire and checked whether Walras’ law held true by excluding the labor supply and demand equation for that same region. However, Walras’ law did not hold true, so we used this method as an alternative.
- 8.
As to how such funding sources are transferred from the central government to local governments in the disaster-affected region under the D2SCGE model, please refer to Section 2, Chapter 5 of Tokunaga and Okiyama (eds) (2014).
- 9.
This model has no assumptions of labor movement and capital transfer between the disaster-affected region and the non-disaster region. Therefore, even if the return to capital in the disaster-affected region had increased by the equivalent of the damage to the capital stock, there is no capital transfer from the non-disaster region to the disaster-affected region. As a result, the real GRP of the disaster-affected region continues to be influenced by the damage to its capital stock, even if the fiscal measures are implemented. In the future, we hope to conduct an improved CGE model that takes into account the movement of production factors between regions.
- 10.
This chapter uses the equivalent variation as an index that measures the economic welfare. According to EcoMod Modeling School (2012), the equivalent variation is the difference between the consumption budget for the household of the “proposed change” deflated by the price index that represents the change in prices induced by the “proposed change” and the consumption budget of the “benchmark equilibrium.” Please refer to Appendix in detail.
References
Board of Audit (2015) About the result of audits concerning the situation of project implementation etc. for the reconstruction etc. form the Great East Japan earthquake Japan revitalization strategy as revised in 2014. The report following the provisions by article 30-3 of the Audit Laws (in Japanese)
Cabinet Office (2011) Estimation of the damage by the Great East Japan Earthquake (in Japanese)
Development Bank of Japan (2011) Estimation of damaged capital stock by the Great East Japan Earthquake -distinct areas such as inland and coast by prefecture(in Japanese) DBJ News
EcoMod Modeling School (2012) Advanced techniques in CGE modeling with GAMS global economic modeling network, Singapore, January 9–13
Hamagushi N (2015) On the recovery of the manufacturing industry from the great East Japan Earthquake. RIETI discussion paper series, 15-J-044, (in Japanese)
Hayashida M, Hamagata S, Nakano K, Hitomi K and Hoshino Y (2011) The impact on the macro-economy of the great East Japan earthquake: calculation the impact based on CRIEPI Macro-econometric model. SERC Discussion paper, SERCI1024, Central research institute of electric power industry socio-economic research center (in Japanese)
Inada Y, Irie H, Shima A and Toizumi T (2011) The impact on the macro-economy suffered from the Great East Japan Earthquake: compound damage to earthquake, tsunami and nuclear power plant disaster. KISER report, Kansai institute for social and economic research (in Japanese).
Japan Institute for Labour Policy and Training (2014) Labor supply and demand estimates–policy simulations based on the labor supply and demand model (2013). Research Material Series129 (in Japanese)
National Institute of Population and Social Security Research in Japan (2012) Population projections for Japan (January 2012): 2011 to 2060. http://www.ipss.go.jp/site-ad/index_english/esuikei/gh2401e.asp
National Institute of Population and Social Security Research in Japan (2013) Regional Population projections for Japan: 2010–2040. .Population Research Series (in Japanese) http://www.ipss.go.jp/pp-shicyoson/j/shicyoson13/6houkoku/houkoku.pdf
Saito M (2015) Political economy for reconstruction of the earthquake disaster. Nippon Hyoron Sha, Japan. (in Japanese)
Tokunaga S, Okiyama M (eds) (2014) Reconstruction the disaster-affected region of the great East Japan Earthquake and recovery of the regional economy. Bunshindou, Japan. (in Japanese)
Author information
Authors and Affiliations
Corresponding author
Editor information
Editors and Affiliations
Rights and permissions
Copyright information
© 2017 Springer Nature Singapore Pte Ltd.
About this chapter
Cite this chapter
Okiyama, M., Tokunaga, S. (2017). Economic Analysis of Fiscal Measures for Reconstructing the Tohoku Region After the Great East Japan Earthquake: Using a Dynamic Two-Regional CGE Model. In: Tokunaga, S., Resosudarmo, B. (eds) Spatial Economic Modelling of Megathrust Earthquake in Japan. New Frontiers in Regional Science: Asian Perspectives, vol 11. Springer, Singapore. https://doi.org/10.1007/978-981-10-6493-7_5
Download citation
DOI: https://doi.org/10.1007/978-981-10-6493-7_5
Published:
Publisher Name: Springer, Singapore
Print ISBN: 978-981-10-6492-0
Online ISBN: 978-981-10-6493-7
eBook Packages: Economics and FinanceEconomics and Finance (R0)