Chapter 16: Computable General Equilibrium Analysis in Transportation Economics

Computable general equilibrium (CGE) analysis, pioneered by Johansen (1960), Harberger (1962), and, on a larger scale, by Shoven and Whalley (1984), is now a standard tool in empirical economics for simulating the effects of variations in exogenous variables and parameters on any kind of economic variable such as output, employment, prices, income, and welfare. Exogenous variations (also called shocks) range from policy variables such as tax rates, tariffs, and transfers over regulatory frameworks to technologies and preferences. The literature is huge. A well-known large multi-country world model is GTAP (Hertel, 1997). A more recent field of application is transport economics, the subject of this chapter. A typical transport economics application is the study of the quantitative impacts of transport initiatives such as infrastructure investments or pricing policies on economic variables.