4 The Scenarios
Four scenarios are modelled in this paper to illustrate how CGE modelling can be used to understand the economy-wide effects of industry policies. The scenarios are derived from:
- a policy intervention that results in increased export demand
- a policy intervention that raises productivity in a particular sector or group of sectors
- the introduction of an R&D tax credit
- a policy intervention that raises productivity in the key margin industry of international freight.
One of the challenges of any modelling exercise is to accurately link the policy intervention to the size of the shock that will be modelled. As this paper focuses on the use of CGE modelling rather than specific policies, this step has generally been glossed over in the scenarios.
