An Application of the Integrated Transport Network-Multi-regional CGE Model An Impact Analysis of Government-Financed Highway Projects

This paper analyses the impacts of highway development with different financing strategies. We examine two ways in which the government can finance highway development projects: it can (a) use current tax system, or (b) impose earmarked taxes. Our model is composed of a transport network model and a multi-regional Computable General Equilibrium model. The model specifies the behaviours of sixteen producers, four regional households, four regional governments, a central government, and the rest of the world. The results indicate that imposing regional earmarked taxes has a greater effect on income growth and the reduction of regional income inequality than does the current tax system. © 2011 LSE and the University of Bath