In this paper, the effects of reducing tariffs are analysed through a Computable General Equilibrium (CGE) model of the DRC. The specific DRC Formal-Informal Model (DRCFIM) is a multi-sectoral computable general equilibrium model that captures the observed structure of the DRC’s formal and informal economies, as well as the numerous linkages or transmission channels connecting their various economic agents, such as investors, firms, traders, and the government. The parameters of the CGE equations are calibrated to observed data from a social accounting matrix (SAM).
Democratic Republic of Congo
This paper examines the effects of land use in the DRC through the application of DRC formal-informal sector computable general equilibrium model, developed with the 2007 DRC Social Accounting Matrix. Two policy options are analysed. Firstly, the hypothetical policy change introduced in the short and long run application of this model is a land use subsidy where a 10% cut in the price of land both in the formal and informal sector is applied. In tracing the impact of this shock on the economy, as expected, gross domestic product and employment increase.
This paper analyses wage subsidies on lower-skilled formal workers in the Democratic Republic of Congo (DRC). A multi-sectoral empirically-calibrated general equilibrium model capturing the economy-wide transactions between the formal and informal sectors is used to analyse one policy simulation in the DRC. The short and long run simulation in which the government provides wage subsidy to lower-skilled workers indicates that the government is able to significantly improve the deficiencies of the formal and informal households’ real disposable incomes.