Three essays on computable general equilibrium (CGE) modeling in Hawai'i: With applications to visitor spending, oil price volatility, and energy sector monopoly power

The objective of this dissertation is to build a Computable General Equilibrium (CGE) model of Hawai'i's economy through testing of parameters and functional forms and with applications to key sectors of the economy such as tourism and energy.;Essay 1 develops the model through a discussion of CGE modeling techniques, previous models of Hawai'i, and new modeling choices for short- and long-run versions of a Hawai'i CGE model. The analysis focuses on visitor spending and improves upon other Hawai'i CGE models by incorporating a Leontief utility nest for visitors where the decision to consume air transportation is separated from all other goods. A 10% reduction in visitor expenditures is analyzed to assess modeling choices. The simulation has the most effect on the petroleum manufacturing sector because visitor activity tends to be oil-intensive.;Essay 2 looks at the effect of rising world oil prices on Hawai'i's economy in the short-run. This analysis provides an illustrative example of the oil price-macroeconomy relationship in a small open economy. Consistent with the literature, sudden oil price increases are found to decrease aggregate productivity, real wages, and are inflationary. Oil price increases have the greatest effect on sectors such as air transportation and electricity generation. Interestingly, although real output of petroleum manufacturing and electric sectors decline, nominal output rises considerably.;Essay 3 extends the analysis of petroleum use in Hawai'i to alternative model structures incorporating upstream and downstream energy sector monopoly power, namely between the petroleum manufacturing and electric sectors. This analysis shows how vertical relationships and market power in the energy sector matter in a CGE framework. The imposition of a 10% tax on domestic petroleum manufacturing and electric sector output is analyzed as well as a 50% increase in world oil prices. The simulations show that neither taxation nor rising oil prices reduce the profitability of oil industries in Hawai'i and, in some cases, can increase profitability. Alternative policy prescriptions, such as encouraging alternative and renewable energy sources to get up to competitive scale, must be made in the move towards clean energy sources.