water transportation contributes less than road transportation, 0.12% to gross output and 0.0179% to demand. The reduction of rail transportation cost slightly raises the total output of production while a little reduces its demand. The phenomenon is given by the increase of the input prices such as labor and capital, then makes the domestic industrial prices a little higher than those in the baseline model. Finally, the reduction cost shock in rail transportation a little reduce the final demand. Nonetheless, this reduction of demand in inbound tourism is too small and can be neglectable in comparison with positive impacts on the nationwide economy.
value of behavior parameter. The robustness of the modeling results is evaluated based on two conditions: (1) whether the sectoral response with respect to each value of parameter differs with that of the model with selected parameter; and (2) whether the ordering of the sectoral outputs is maintained with various value of parameter. If both conditions are satisfied, one can conclude confidently that the results of the modeling are robust.
Table 6-10. Sensitivity test scenario design Parameter test Based
Scenario
Sensitive test T0
Sensitive test T1 (Central)
Sensitive test T2
Sensitive test T3
Sensitive test T4 Armington CET
parameter σCET
Based line SAM outputs
0.5𝜎𝐶𝐸𝑇𝑆 𝜎𝐶𝐸𝑇𝑆 4𝜎𝐶𝐸𝑇𝑆 6𝜎𝐶𝐸𝑇𝑆 10𝜎𝐶𝐸𝑇𝑆 Armington CES
of dom. and import σD
SAA 0.5𝜎𝐷𝑆 𝜎𝐷𝑆 4𝜎𝐷𝑆 6𝜎𝐷𝑆 10𝜎𝐷𝑆
Price elasticity of tourism export demand σP
SAA 0.5𝜎𝑃𝑆 𝜎𝑃𝑆 4𝜎𝑃𝑆 6𝜎𝑃𝑆 10𝜎𝑃𝑆
Factor of production elasticity σVA
SAA 0.5𝜎𝑉𝐴𝑆 𝜎𝑉𝐴𝑆 4𝜎𝑉𝐴𝑆 6𝜎𝑉𝐴𝑆 10𝜎𝑉𝐴𝑆
Note:
- SAA: Same as above.
- “Central scenario”: is defined as the modeling scenario with selected parameters of substitution.
- Abbreviation “S” in 𝜎𝐶𝐸𝑇𝑆 , 𝜎𝐷𝑆, 𝜎𝑃𝑆, 𝜎𝑉𝐴𝑆 denotes for the “Selected value” of respective elasticity parameters at central scenario.
For sensitivity test, “Central scenario” is defined as the test scenario (T1) with the selected behavior parameters of Armington transformation (CET), Armington of CES between domestic and import goods, factors of CES production function (VA), and the elasticity of tourism export demand with domestic price. In the central scenario, the cost of all transportation modes is deregulated 20%. The central test scenario, the all parameters are defined as the same as those in the scenario 5 (S5) of the CGE analysis.
Based line scenario is the “do no-thing” scenario, all the outputs of the model are from the SAM. The difference between the outputs of test T1 and those of based scenario is as the same as the difference between the outputs of the scenario 5 and those of based scenario. It illustrates for the economic impacts of the deregulation of transportation cost in all transportation modes.
The test scenarios from T0 to T4 represent for the varying value of parameters from very less elastic (or almost inelastic, T0) to very elastic (T4). With the 20% reduction in cost of all transportation modes, the modeling is repeatedly operating with the test from T0 to T4. The results are aggregated and compared to check the robustness of the model.
6.10.2 Sensitive test results
There are nine aggregated variables chosen to be illustrated for sensitivity test, which are national GDP, utility, welfare, gross output, demand for import, demand for export non-tourism products, demand for export non-tourism products, domestic final demand, and ratio of national GDP by total final demand.
Table 6-11. Sensitive test of Constant Elasticity of Transformation CET with 20% cost reduction of all transportation modes
Table 6-11 illustrates the sensitivity of the model with constant elasticity of transformation, all the variables seem not change much while the CET value varies from half to ten times of the selected value. Specifically, GDP, utility, EV, and total gross output remain stable; there are little changes in variables of non-tourism export demand, import, and domestic final demand when CET value reduces 50% (T0) from the selected value (T1). All the values of each variables with respect to the variation of CET from T1
T0(SCET*0.5) T1(SCET*1) T2(SCET*4) T3(SCET*6) T4(SCET*10) Benchmark All modes -20% All modes -20% All modes -20% All modes -20% All modes -20%
476,904,203
480,154,317 480,154,109 480,154,109 480,154,109 480,154,109
0.6815% 0.6815% 0.6815% 0.6815% 0.6815%
362,460,382
364,930,558 364,930,400 364,930,400 364,930,400 364,930,400
0.6815% 0.6815% 0.6815% 0.6815% 0.6815%
Increase of Welfare (EV) - 3,250,114 3,249,906 3,249,906 3,249,906 3,249,906 1,022,971,615
1,031,879,974 1,031,879,922 1,031,879,922 1,031,879,922 1,031,879,922
0.8708% 0.8708% 0.8708% 0.8708% 0.8708%
60,876,184
61,433,097 61,433,296 61,433,296 61,433,296 61,433,296
0.9148% 0.9152% 0.9152% 0.9152% 0.9152%
Non-tourism export 59,760,162 60,142,806 60,143,006 60,143,006 60,143,006 60,143,006
0.6403% 0.6406% 0.6406% 0.6406% 0.6406%
Tourism export 1,116,021 1,290,290 1,290,290 1,290,290 1,290,290 1,290,290
15.6152% 15.6152% 15.6152% 15.6152% 15.6152%
Import demand 83,296,759 83,570,107 83,570,091 83,570,091 83,570,091 83,570,091
0.3282% 0.3281% 0.3281% 0.3281% 0.3281%
448,381,160
451,382,939 451,382,743 451,382,743 451,382,743 451,382,743
0.6695% 0.6694% 0.6694% 0.6694% 0.6694%
Ratio Real GDP/Final demand 0.93647 0.93631 0.93631 0.93631 0.93631 0.93631
Gross production of output (Mil. JPY)
Real National GDP (Mil. JPY)
Export demand (Q) Utility
Domestic fn Demand
to T4 are the same.
Table 6-12. Sensitive test of CES Domestic/Import good D with 20% cost reduction of all transportation modes
Comparison to CET, the model is a little more sensitive to CES between domestic and import intermediate goods. Applying the shock of reduction 20% of transportation margin, the GDP, utility, and EV change from +0.0005% to -0.0059% as CES σD varying from 50% to 10 times of selected value. With the same range of σD variation, the gross output varies from +0.0061% to 0.0683%; nontourism export good does from +0.0011% to -0.0122%; tourism export is from -0.0003% to 0.0037%; import demand is from 0.0015%
to -0.0163%; and domestic final demand is from 0.0005% to -0.0052% respectively comparing to the selected value of CES between domestic and import intermediate goods.
T0(DS*0.5) T1(DS*1) T2(DS*4) T3(DS*6) T4(DS*10) Benchmark All modes -20% All modes -20% All modes -20% All modes -20% All modes -20%
476,904,203
480,156,649 480,154,109 480,140,737 480,134,584 480,125,742
0.6820% 0.6815% 0.6787% 0.6774% 0.6755%
362,460,382
364,932,331 364,930,400 364,920,237 364,915,560 364,908,840
0.6820% 0.6815% 0.6787% 0.6774% 0.6755%
Increase of Welfare (EV) - 3,252,446 3,249,906 3,236,534 3,230,381 3,221,539 1,022,971,615
1,031,942,547 1,031,879,922 1,031,550,379 1,031,398,818 1,031,181,089
0.8769% 0.8708% 0.8386% 0.8238% 0.8025%
60,876,184
61,433,946 61,433,296 61,429,877 61,428,304 61,426,043
0.9162% 0.9152% 0.9095% 0.9070% 0.9032%
Non-tourism export 59,760,162 60,143,659 60,143,006 60,139,567 60,135,712 60,135,712
0.6417% 0.6406% 0.6349% 0.6284% 0.6284%
Tourism export 1,116,021 1,290,287 1,290,290 1,290,310 1,290,318 1,290,331
15.6149% 15.6152% 15.6169% 15.6177% 15.6189%
Import demand 83,296,759 83,571,306 83,570,091 83,563,693 83,560,749 83,556,520
0.3296% 0.3281% 0.3205% 0.3169% 0.3119%
Domestic fn Demand 448,381,160 451,384,822 451,382,743 451,371,795 451,366,759 451,359,521
0.6699% 0.6694% 0.6670% 0.6659% 0.6642%
Ratio Real GDP/Final demand 0.93647 0.93631 0.93631 0.93631 0.93631 0.93631
Gross production of output (Mil. JPY)
Real National GDP (Mil. JPY)
Export demand (Q) Utility
Table 6-13. Sensitive test of factor elasticity of substitution VA with 20% cost reduction of all transportation modes
The results of sensitivity test with factor of substitution (as shown in Table 6-13) are the same manner with those with CES between domestic and import intermediate and substitution of transformation. The test with half value of σVA reduces approximately 11,000 Mil JPY (-0.0023%) and test with four times of σVA increase approximately 9,000 mil JPY (+0.0021%) in comparison with that of the central value. The gross output increases 0.0024% in the test T0 if reduces the σVA as half as the central value (T1); four times of that will reduce the total output -0.0021% (T2); the result of gross output reduces 0.0026% in compare with the central value T1 in the case of increasing σVA to ten times as it in central value. The test results appear as the same trend as that with non-tourism export, tourism export, import demand and domestic final demand.
T0(VAS*0.5) T1(VAS*1) T2(VAS*4) T3(VAS*6) T4(VAS*10) Benchmark All modes -20% All modes -20% All modes -20% All modes -20% All modes -20%
476,904,203
480,143,202 480,154,109 480,163,949 480,165,149 480,166,126
0.6792% 0.6815% 0.6835% 0.6838% 0.6840%
362,460,382
364,922,110 364,930,400 364,937,879 364,938,791 364,939,533
0.6792% 0.6815% 0.6835% 0.6838% 0.6840%
Increase of Welfare (EV) - 3,238,999 3,249,906 3,259,746 3,260,946 3,261,923 1,022,971,615
1,031,904,154 1,031,879,922 1,031,858,058 1,031,855,392 1,031,853,221
0.8732% 0.8708% 0.8687% 0.8684% 0.8682%
60,876,184
61,435,371 61,433,296 61,431,425 61,431,196 61,431,011
0.9186% 0.9152% 0.9121% 0.9117% 0.9114%
Non-tourism export 59,760,162 60,145,091 60,143,006 60,141,125 60,140,709 60,140,709
0.6441% 0.6406% 0.6375% 0.6368% 0.6368%
Tourism export 1,116,021 1,290,280 1,290,290 1,290,299 1,290,301 1,290,301
15.6143% 15.6152% 15.6160% 15.6161% 15.6162%
Import demand 83,296,759 83,571,541 83,570,091 83,568,782 83,568,623 83,568,493
0.3299% 0.3281% 0.3266% 0.3264% 0.3262%
448,381,160
451,379,268 451,382,743 451,385,883 451,386,266 451,386,579
0.6687% 0.6694% 0.6701% 0.6702% 0.6703%
Ratio real GDP/Final demand 0.93647 0.93629 0.93631 0.93633 0.93633 0.93633
Gross production of output (Mil. JPY)
Real National GDP (Mil. JPY)
Export demand (Q) Utility
Domestic fn Demand
Table 6-14. Sensitive test of price elasticity of demand of tourism export P with 20% cost reduction of all transportation modes
The test explicitly indicates that tourism export demand is very sensitive with the value of price elasticity of demand. The value of tourism export demand varies in a wide range, from 7.86% to 303.33% when price elasticity changes from half (T0) to ten times (T4) of central value (T1). Along with the increase of tourism export demand, the EV, domestic final demand and import demand decrease as increase of price elasticity of tourism export.
The tourism export demand increase stimulates the national gross output. Nevertheless, the ratio of real income and domestic final demand, which indicates for the average of real income per unit of domestic final demand seems remain as constant or change very small.
To summary, the sensitivity tests indicate that to extent to which the model variables are sensitive depends on the substitution parameter. The demand of tourism export is very sensitive with the changes of the price elasticity of demand. The increase of price elasticity of tourism export leads to the increase of the tourism export demand. Along with this increase, the domestic final demand trends to reduce when value of price elasticity increases. The overall result shows that the income per unit of final demand is unchanged. The tests with the substitution values of production factors, domestic-import intermediate goods, and substitution of CET appear as robust when sectoral gross outputs and sectoral GDPs of cross economy are not much different as the substitution values
T0(PS*0.5) T1(PS*1) T2(PS*4) T3(PS*6) T4(PS*10) Benchmark All modes -20% All modes -20% All modes -20% All modes -20% All modes -20%
476,904,203
480,240,185 480,154,109 479,490,870 478,867,581 476,957,942
0.6995% 0.6815% 0.5424% 0.4117% 0.0113%
362,460,382
364,995,820 364,930,400 364,426,320 363,952,603 362,501,224
0.6995% 0.6815% 0.5424% 0.4117% 0.0113%
Increase of Welfare (EV) - 3,335,982 3,249,906 2,586,667 1,963,378 53,739 1,022,971,615
1,031,851,237 1,031,879,922 1,032,101,878 1,032,311,603 1,032,958,623
0.8680% 0.8708% 0.8925% 0.9130% 0.9763%
60,876,184
61,347,366 61,433,296 62,095,484 62,717,873 64,625,107
0.7740% 0.9152% 2.0029% 3.0253% 6.1583%
Non-tourism export 59,760,162 60,143,585 60,143,006 60,138,703 60,123,869 60,123,869
0.6416% 0.6406% 0.6334% 0.6086% 0.6086%
Tourism export 1,116,021 1,203,781 1,290,290 1,956,781 2,583,014 4,501,238
7.8636% 15.6152% 75.3355% 131.4485% 303.3291%
Import demand 83,296,759 83,575,345 83,570,091 83,529,606 83,491,561 83,375,004
0.3345% 0.3281% 0.2795% 0.2339% 0.0939%
Domestic fn Demand 448,381,160 451,463,722 451,382,743 450,758,771 450,172,389 448,375,835
0.6875% 0.6694% 0.5303% 0.3995% -0.0012%
Ratio Real GDP/Dom Final
demand 1.06361 1.06374 1.06374 1.06374 1.06374 1.06375 Gross production of output
(Mil. JPY)
Real National GDP (Mil. JPY)
Export demand (Q) Utility
vary in wide range from half to ten times of central values.