Pitfalls and Solutions in the Application of Spatial Compatible General Equilibrium Models
L A Tavasszy and J Muskens, TNO Inro;
The use of spatial equilibrium models for assessing the economic impacts of transport projects is one of the key items on the research agenda for project appraisal in the Netherlands. These models are particularly suitable to analyse indirect effects of transport projects through linkages between the transport sector and the wider economy (i.e. the transport using sectors). Potentially, according to the literature, these impacts can turn out to be up to 40% in magnitude of the direct impacts. There is, however, no general indication that indirect effects are always of this magnitude - this has to be proven on a case-by-case basis. After two years of applications of SCGE models for transport appraisal, we found that the conventional specification of spatial equilibrium models can lead to problems in project appraisal in terms of inaccuracies in the assessment of impacts. This paper discusses how to fine-tune these models to allow an accurate assessment of these indirect effects. These ideas should be of value for those practitioners or researchers who are developing SCGE applications for use in transport appraisal.
Association for European Transport