- Many important policy problems entail linkages among multiple economic sectors, and require the use of a general equilibrium economic modeling framework. This economic approach is appropriate when the market for any one good or service is linked to numerous other goods and services, and back to fundamental inputs such as labor and capital. In this dissertation, a computable general equilibrium (CGE) model for the Pacific Northwest region is developed. It describes all parts of Pacific Northwest economy simultaneously and how its industries, households, government institutions, and factors of production interact with each other.
The model is used to address two policy issues in the Northwest: development of a new biofuels supply chain, and the impact of future events such as climate change on Pacific Northwest farmers. Before these applications are carried out, a major effort is made to estimate the parameters of the general equilibrium model, and to validate that the model is representative of the regional economy. Techniques from the literature on calibration of macro-economic models are employed, in conjunction with historical agricultural price and quantity data for the Northwest. These methods allow greater confidence to be placed in the analyses that follow.
Once the model is parameterized and validated, the first application concerns the potential of an oilseed crop, camelina, to be used as a new biofuel for the aviation sector. The aim of this study is to identify conditions and policies under which a supply chain could be developed within the Northwest. Several policy options are examined within the model with regard to meeting stated targets by the aviation sector for using camelina as a biofuel. Model results indicate that a regional supply chain for biofuels is unlikely to develop unless subsidies are targeted to particular activities, including farming and processing. Particular estimates of these subsidies are derived.
The second application of the model concerns how the Pacific Northwest wheat economy will be affected by long-run changes in climate, population growth, input costs, and other phenomena. A series of possible future scenarios, called Representative Agricultural Pathways (RAPs), are developed to describe trends in key drivers at the regional and global scales. These RAPs are quantified and integrated as simulations into the CGE model, the first time this has been done within the literature. In general the health of the Pacific Northwest wheat sector, as represented by wheat prices, exports quantities, and producer economic welfare, appears to be quite viable under a range of alternative future scenarios.