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Table of contents
1. Introduction ... 1
1.1. General introduction ... 1
1.2. Objectives of the dissertation ... 2
1.3. Presentation of Belgian regional economies and institutions ... 4
1.3.1. The present situation of Belgian institutions ... 4
1.3.2. History of the financing mechanism of regions and communities ... 6
1.3.2.1. Starting reforms up to 1989 ... 6
1.3.2.2. Last reforms: from 1993 to 2001 ... 12
1.4. Outline of the dissertation... 14
2. Literature survey on regional models ... 16
2.1. Introduction ... 16
2.2. Input-output (IO) models ... 16
2.3. General equilibrium models... 19
2.4. Development of regional models in Belgium ... 22
3. Model description ... 24
3.1. Firms ... 26
3.2. Households ... 31
3.3. Government ... 34
3.3.1. Federal Government ... 34
3.3.2. Regional governments ... 35
3.3.3. French Community (Communauté Wallonie-Bruxelles) ... 36
3.4. Inter-regional and foreign trade ... 37
3.5. Investment demand ... 40
3.6. Price equations ... 42
3.7. Labour market ... 43
3.8. Market clearing equations ... 44
3.9. Greenhouse gas emissions ... 45
3.10. Closure rules ... 47
3.11. Incorporation of dynamics ... 49
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4. Construction of the social accounting matrix (SAM) ... 55
4.1. Introduction ... 55
4.2. Building of the National (Belgian) SAM 2003 ... 57
4.2.1. The production account ... 64
4.2.2. The commodities account ... 66
4.2.3. The factors of production account ... 68
4.2.4. The institutional accounts ... 69
4.2.4.1. The firms account... 69
4.2.4.2. The households account ... 69
4.2.4.3. The general government account ... 70
4.2.5. The capital account ... 70
4.2.6. The rest of the world account ... 71
4.2.7. The taxes-subsidies account ... 72
4.2.8. Balancing the national social accounting matrix ... 72
4.3. Regional SAMs for 2003 ... 72
4.3.1. The production account ... 99
4.3.2. The commodities account ... 103
4.3.3. The factors of production account ... 105
4.3.4. The institutional accounts ... 105
4.3.4.1. The firms account... 105
4.3.4.2. The households account ... 106
4.3.4.3. The general government account ... 106
4.3.5. The capital account ... 109
4.3.6. The rest of the world account ... 109
4.3.7. The taxes-subsidies account ... 110
4.3.8. Balancing the regional social accounting matrices ... 110
4.4. Summary of the main components of the database ... 111
4.4.1. Regional GDP and GDP components ... 111
4.4.2. Regional productions ... 118
4.4.3. Regional compensation of employees ... 120
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5. Energy consumption and greenhouse gas emissions ... 123
5.1. Introduction ... 123
5.2. Greenhouse gas emissions ... 124
5.3. Energy consumption ... 134
6. Simulations ... 136
6.1. First simulation: Carbon tax at 20 euro per ton of CO2 emissions in 2013-2020 and 30 euro per ton of CO2 emissions in 2021-2050, and decrease of social contributions ... 137
6.1.1. Introduction ... 137
6.1.2. Simulation results ... 141
6.2. Second simulation: linear increase of crude oil price up to 150 US dollars per barrel in 2050 ... 149
6.2.1. Introduction ... 149
6.2.2. Simulation results ... 154
7. Conclusion ... 167
7.1. Overview and main findings ... 167
7.2. Future research ... 174
Appendices ... 176
Appendix A: Model Equations ... 176
A.1. Firms:Equation Chapter 6.2 Section 1 ... 176
A.2. Households: ... 178
A.3. Federal Government: ... 179
A.4. Regional Governments: ... 180
A.5. French Community: ... 180
A.6. Inter-regional and foreign trade: ... 181
A.7. Investment: ... 181
A.8. Zero profit conditions: ... 182
A.9. Labour market: ... 183
A.10. Market clearing: ... 184
A.11. Greenhouse gases emissions: ... 184
A.12. Gross domestic product (national and regional) and other aggregate variables: ... 186
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A.13. Equivalent variation ... 187
A.14. Incorporation of recursive dynamics ... 187
Appendix B: Disaggregation of branches of activity ... 203
B.1. Complete database with 62 branches of activity ... 203
B.2. Aggregated database with 20 branches of activity ... 205
Appendix C: Disaggregation of goods and services (commodities) ... 206
C.1. Complete database with 69 goods and services (commodities) ... 206
C.2. Aggregated database with 27 goods and services (commodities) ... 208
Appendix D: Results for the first simulation - introduction of CO2 tax of 20 euro in 2013-2020 and 30 euro in 2021-2050 ... 209
Table D.1: Sectoral effects (% change compared to BAU) – 2013 ... 209
Table D.2: Sectoral effects (% change compared to BAU) – 2014 ... 210
Table D.3: Sectoral effects (% change compared to BAU) – 2020 ... 211
Table D.4: Sectoral effects (% change compared to BAU) – 2021 ... 212
Table D.5: Sectoral effects (% change compared to BAU) – 2050 ... 213
Table D.6: Macroeconomic effects (% change compared to BAU) ... 213
Table D.7: Real gross domestic product effects (% change compared to BAU) ... 214
Table D.8: Labour market at federal level (% change compared to BAU) ... 214
Table D.9: Labour market at regional level (% change compared to BAU) ... 214
Table D.10: Equivalent variation in % of household income (% change compared to BAU) ... 214
Table D.11: Household – first income group (% change compared to BAU) .... 215
Table D.12: Household – second income group (% change compared to BAU) ... 215
Table D.13: Domestic production by branch of activity (% change compared to BAU) ... 216
Table D.14: Employment by branch of activity (% change compared to BAU) . 217 Table D.15: Exports by branch of activity (% change compared to BAU) ... 218
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Table D.16: Imports by commodity (% change compared to BAU) ... 219
Table D.17: Private consumption by commodity (% change compared to BAU) ... 220
Table D.18: Investments by branch of activity (% change compared to BAU) .. 221
Table D.19: Production price by branch of activity (% change compared to BAU) ... 222
Table D.20: Consumer prices by commodity (% change compared to BAU) ... 223
Table D.21: GHG emissions (% change compared to BAU) ... 224
Table D.22: CO2 emissions (% change compared to BAU) ... 224
Table D.23: N2O emissions (% change compared to BAU) ... 224
Table D.24: CH4 emissions (% change compared to BAU) ... 224
Table D.25: GHG emissions in kilotonnes (kt) ... 225
Appendix E: Results for the second simulation - increase of oil prices to 150 US dollars per barrel in 2050 ... 226
Table E.1: Macroeconomic effects (% change compared to BAU) ... 226
Table E.2: Real gross product (% change compared to BAU) ... 226
Table E.3: Effects by energy source (% change compared to BAU) ... 227
Table E.4: Private consumption (% change compared to BAU) ... 228
Table E.5: Investments by branch of activity (% change compared to BAU) .... 229
Table E.6: Exports by branch of activity (% change compared to BAU) ... 230
Table E.7: Imports by commodity (% change compared to BAU) ... 231
Table E.8: Domestic production by branch of activity (% change compared to BAU) ... 232
Table E.9: Labour market at federal level (% change compared to BAU) ... 232
Table E.10: Labour market at regional level (% change compared to BAU) ... 233
Table E.11: Equivalent variation in % of household income (% change compared to BAU) ... 233
ix Table E.12: Production price by branch of activity (% change compared to BAU)
... 234
Table E.13: Consumer prices by commodity (% change compared to BAU) .... 235
Table E.14: Household – first income group (% change compared to BAU) .... 236
Table E.15: Household – second income group (% change compared to BAU) ... 236
Table E.16: GHG emissions (% change compared to BAU) ... 236
Table E.17: CO2 emissions (% change compared to BAU) ... 236
Table E.18: N2O emissions (% change compared to BAU) ... 237
Table E.19: CH4 emissions (% change compared to BAU) ... 237
Table E.20: GHG emissions in kilotonnes (kt) ... 237
Appendix F: Elasticities of substitution used in BelMod ... 238
Table F.1: Elasticities of substitution (short-run and long-run) for the production structure, for the first group of production sectors ... 239
Table F.2: Elasticities of substitution (short-run) for the production structure, for the second group of production sectors ... 240
Elasticities of substitution (short-run) for the production structure, for the second group of production sectors (continued) ... 241
Table F.3: Elasticities of substitution (long-run) for the production structure, for the second group of production sectors ... 242
Elasticities of substitution (long-run) for the production structure, for the second group of production sectors (continued) ... 243
Table F.4: Elasticities of substitution between domestic production delivered to domestic market and exports... 244
Elasticities of substitution between domestic production delivered to domestic market and exports (continued) ... 245
x Table F.5: Elasticities of substitution between domestic production delivered to domestic market and imports ... 246 Elasticities of substitution between domestic production delivered to domestic market and imports (continued) ... 247
