Abstract
In this paper, we will develop a dynamic multi-regional Computable General Equilibrium (CGE) model with transportation networks. We define two economies, a centralized economy and a decentralized economy. In the centralized economy, a social optimization problem is formulated where the social welfare is maximized subject to the inter-temporal constraints of product, labor and capital markets. In the decentralized economy, a market economy with utility-maximizing consumers and value-maximizing firms which face costs of adjustment for capital is characterized. We show the equivalency of two economies because there is no distortion in the market system. A simulation model is specified under the multi-regional and inter-sectoral economy in Japan which is connected by four kinds of transportation networks, i.e., road, railway, sea and air. A numerical example is performed to show the behavior of the dynamic solution.
JEL Classification: R11, R13, R15
