Forecasting the Economic impact of an industrial stoppage using a dynamic, computable general equilibrium model

This paper demonstrates that dynamic computable general equilibrium (CGE) simulations can provide estimates of the economy-wide effects of industrial stoppages. Such estimates could be used in broad discussions of the contribution to economic welfare of improved industrial relations. They could also be used in narrowly focussed discussions, e.g. in the Australian Industrial Relations Commission in a determination under the Workplace Relations Act of the economic damage associated with a specific stoppage. An attractive feature of CGE simulation is that it can capture relevant details of particular circumstances. We illustrate this with a CGE analysis of the effects of a hypothetical stoppage in the Victorian non-residential construction industry. As explained in the paper, our simulation results reflect explicit assumptions about the nature of the industry in which the stoppage occurs, the wage adjustment process and the state of the business cycle.