1. Doha Development Round & Egypt : “What If The Capital is Endogenized? The Turkish Team D.Selim PASLI, A.Emre AKEL, Iclal SINCER

2. OUTLINE INTRODUCTION RESULTS –DEMAND SIDE –SUPPLY SIDE CONCLUSION

3. Introduction What would happen to Egyptian economy in the long run during DOHA Development process? : `the exogenous variable “capital” becomes endogenous…` So, the initial model reflects the short run while our model reflects the long run…

4. Version Version : egypt200 26 x 12 sectors and regions Egypt, China, EU, LDC, India, USA… etc. Apparel and Leather Products, Fibers, Textiles, Trade and Financial Services, Metal Products, Wood and Paper… etc.

5. Closure Trade balance is fixed swap dtbalr("LDC") = dpsave("LDC"); swap dtbalr("CENTAM") = dpsave("CENTAM"); swap dtbalr("Mexico") = dpsave("Mexico"); swap dtbalr("MERCOSUR") = dpsave("MERCOSUR"); swap dtbalr("CHINA") = dpsave("CHINA"); swap dtbalr("INDIA") = dpsave("INDIA"); swap dtbalr("JAPAN") = dpsave("JAPAN"); swap dtbalr("USA") = dpsave("USA"); swap dtbalr("Egypt" ) = dpsave("Egypt"); swap dtbalr("ROW") = dpsave("ROW"); Capital is endogenized swap qo("capital", REG)= expand("capital", REG); # change in investment levels relative to endowment stock # (all,i,ENDWC_COMM)(all,r,REG), EXPAND(i,r) = qcgds(r) - qo(i,r) What we have changed…

6. Shocks & Solution method SHOCKS from CEPII DDA Scenarios and elimination of agricultural export subsidies; Shock tms(AG_COMM, REG, REG) Shock tms(NONAG_COMM,REG,REG) Shock txs(AG_COMM,REG,REG) = target% 0 Solution Method Gregg 2-4-6 steps extrapolation We made no change in this part

7. Results Total welfare increased from 11 ml $ to 169 ml $. Allocation efficiency and endowment effects are the main contributors. SR=initial report

8. The driving factor leading allocative efficiency from 70 ml $ to 104 ml $ is the capital : 0 to 30 million dollars… –tax rate on capital : 9.8% –dvol increases 300 ml $ Results-Demand Side

9. Endowment effect increases from 74 ml $ to 211 ml $ : –Capital stock qo (capital) increases from 0 to 0.74% –All of the sectors increased their demand on capital; especially Wheat, Livestock, Paddyrice and Cereal. SO, IT IS THE FIRMS DRIVING THIS INCREASE IN DEMAND OF CAPITAL Results-Demand Side

10. The total welfare of the world also increased: 54 bl $ to 120 bl $... In the short run savings decreased about 11%. Contrarily in the long run, savings increased about 12%... By looking through the rate of return values, we saw that ‘rore’ decreased from 0.3 to -0.35 in the long run… The price of the capital falls…. Results-Supply Side

11. In the long run, trade liberalization effects welfare much more positively compared to short run ! Egypt also benefits welfare increase… The effects of allowing capital to expand has so many complicated linkages, generally as a mix composition of supply and demand side effects… Further digging is essential and is on the process… CONCLUSION

13. THANK YOU