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PROVIDE Project Technical Paper 2003: 3 October 2003 price, PWM c , times the exchange rate, ER, plus an ad valorem adjustment for import duties, tm c . All domestically consumed commodities are subject to a sales tax, ts c . Domestic production activities receive average prices for their output, PX a , that are determined by the commodity composition of their outputs. Since activities produce multiple outputs their outputs can be represented as an index, QX a , formed from the commodity composition of their outputs. In addition to intermediate inputs, activities also purchase primary inputs, FD f,a , for which they pay average prices, WF f . To create greater flexibility the model allows the price of each factor to vary according to the activity that employs the factor. Finally each activity pays production taxes, the rates, tx a , for which are proportionate to the value of activity outputs. The model allows for the domestic use of both domestic and foreign owned factors of production, and for payments by foreign activities for the use of domestically owned factors. Factor incomes therefore accrue from payments by domestic activities and foreign activities, factwor f , where payments by foreign activities are assumed exogenously determined and are denominated in foreign currencies. After allowing for depreciation, deprec f , and the payment of factor taxes, tf f , the residual factor incomes, YFDIST f , are divided between domestic institutions (households, enterprises and government) and the rest of the world in fixed proportions. Households receive incomes from factor rentals and/or sales, inter household transfers, hohoconst h,h , transfers from enterprises, hoentconst h , and government, hogovconst h , and remittances from the rest of the world, howor h , where remittances are defined in terms of the foreign currency. Household expenditures consist of payments of direct/income taxes, ty h , after which savings are deducted, where the savings rates, caphosh h , are fixed exogenously in the base model. The residual household income is then divided between inter household transfers and consumption expenditures, with the pattern of consumption expenditures determined by the household utility functions. © S. McDonald 8
PROVIDE Project Technical Paper 2003: 3 October 2003 Table 3 Transactions Relationships for the Standard Model Commodities Activities Factors Households Commodities 0 ( PQD * QINTD ) c c 0 ( PQD * QCD ) c c Activities ( PXCc* QXC c) ( PX * QX ) a a Factors 0 ( WFf * FD f , a) Households 0 0 Enterprises 0 0 Government ( tmc * PWM c * QM c * ER ) ( tec * PWEc * QEc * ER ) ( ts * PQS * QQ ) c c c Capital 0 0 Rest of World ( PWM * QM * ER ) c c 0 0 0 ( tx * PX * QX ) a a a Total ( PQD * QQ ) ( ) c c 0 ⎛ ⎜ ⎝ ⎛ ⎜ ⎝ 0 0 ∑ hovashh, f* YFDISPf ( ∑ hohoconst hh hh, h ) f ∑ f f ∑ ⎞ entvash f * YFDISPf ⎟ ⎠ ⎞ govvash f * YFDISPf ⎟ ⎠ tf * YFDISP ( f f ) ⎛ ⎞ ⎜∑ worvash f * YFDISPf ⎟ ⎝ f ⎠ PX * QX YF f a a 0 ( ty * YH ) ∑ deprec f ( caphoshh * YH h) f h 0 YH h h © S. McDonald 9
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