The objectives of this paper are twofold. First, we construct a new interregional Computable General Equilibrium (CGE) model with three regions in Indonesia. This model is the interregional CGE model based on the 1995 Interregional Social Accounting Matrix (IRSAM). Second, we evaluate the impacts of tariff reduction and fiscal decentralization on these regional economies as well as on the entire Indonesian economy. Scenario 1 of the import tariff cut shows the tariff reduction reduces in tariff revenue and decreases in the imported goods price, but in industry activity, exports sectors such as the textile sector in Java benefits, while import competing sectors are more likely to suffer damage. From these scenarios of fiscal decentralization policy, we found that scenario 3 of decentralized government spending in Sumatra is better than Scenario 2 of more equal decentralized government spending in outer Java and Scenario 4 of more decentralized government spending in the rest of Indonesia for fiscal decentralization policies.
This paper investigates the effects of foreign direct investment (FDI) into the export processing zones (EPZs) on factor rewards, national income, and the price and output of a domestic intermediate good producing sector (backward linkage effect) under a local content requirement (LCR) by the host government. FDI has important regional resource allocation effects between the domestic region and EPZ through the backward linkage effect. It also examines the effects of a change in the LCR itself on these variables.
This paper analyzes the “Japanese-type” capital gains tax, which before January 2003 was levied on the stock sales price rather than on realized capital gains. We derive the cost of capital under the tax system in various cases, compare the cost of capital with that under the “standard” tax system, and show that which is higher depends not only on various capital income taxes and on the after-tax rate of return to savings, but more on the firm's dividend (or financial) policies. We then show that the capital gains tax has no effect whatsoever on capital accumulation and welfare in the short run.
This note has two aims. One is to assert that, for a positive function in Rn++, Friedman's Theorem (1973, Theorem 2) holds without the non-decreasingness property in his Assumption 1. The other is to propose a similar theorem based on his theorem and then to show that Eichhorn's theorem (1981, Collorary 2) is derived from our theorem.