The impact of relocation of government activities: a CGE model for the city of Buenos Aires.

OMAR OSVALDO CHISARI; MARIA PRISCILA RAMOS; SONIA LEÓN; GONZALO BASANTE PEREYRA; LAURA MASTROCELLO

Cordoba

Jornada; Jornadas Internacionales de Finanzas Publicas; 2015

Facultad de Ciencias Economicas de la Universidad Nacional del Cordoba

Recent proposals of the Argentinean capital city relocation and the already begun relocation process of the local public offices from the North to the South of the city seem to be no neutral for the rest of local economy. Changes in relative prices of goods and factors resulted from these public administration decisions can affect households and activity sectors agglomeration and dispersions within the city or to the rest of the country. In order to evaluateand quantify the economic impact of two government relocation scenarios, we developed a multi-region and multi-sector CGE urban model calibrated for 2011. Results shows that while the relocation of the national government to the rest of the country negatively affects the local GGP and the tax collection, moving local public offices to the South of the city improves its value-added and particularly that of the Southern sub-region. However, under any of the two scenarios, (poor) households (and also Services) agglomerate in the North ofthe city since the real estate price and location costs relatively fall. These results are robust to changes in the model assumptions (capital and labor mobility) and the value of key parameters (elasticities of substitution between inputs and factors in production functions).