The economy-wide effects of the BSE crisis: A CGE analysis

A Computable General Equilibrium (CGE) model of the UK economy is used to investigate the economy-wide effects of the BSE crisis. The impact of two alternative government strategies Sm dealing with the crisis support buying and subsidy payments, are compared with the scenario of no government intervention. The results indicate that whilst the macroeconomic consequences of the crisis may be small in percentage terms, substitution and resource re-allocation effects are substantial. In particular, the impact spreads far beyond those directly impacted by the shock with some sectors of the food industry benefiting Moreover the alternative government strategies have very different macro economic and intersectoral effects. It is argued that the results support the further development of the model and underlying database.