| After the breakdown of Soviet Union, Kazakhstan declared its independence on December 16, 1991. The transition from a Soviet-type command economy to a market system started, through tentative privatizations and institutional measures. In this research I illustrate counterfactual, comparative-static simulation experiments performed using a multi-sector, Computable General Equilibrium (CGE) framework. This CGE model is then used to provide an analysis of the prospects of Kazakhstan's economic transition in the medium term. The model contains eight industries, two factors of production, and one household. The CGE model is calibrated to a Social Accounting Matrix (SAM) based on the Kazakh data for 1993. It is solved by Generalized Algebraic Modeling System (GAMS). Four different simulations are described to explore the consequences of possible changes that the Kazakh economy may undergo during the transition period. First, the impact of higher oil revenues is analyzed. Second, the consequences of an export tax on the energy sector is examined. Third, the outcomes of imposing tariffs on the imports are investigated. Finally, the impact of a decline in labor force is observed. The simulations of the Kazakh CGE model have yielded important results. First, an oil boom will exert different effects on each sectors. The tradeable sectors, mostly metallurgy and energy, will face output contraction. Clearly, some form of subsidy to the harmed sectors will be appropriate. Unless the government pays more attention to developing the competitiveness of the non-oil sectors, Kazakhstan's mineral and energy wealth may constrain the development of those sectors. Second, the levying of an export tax on oil will cause a decline in both the production and the exports of this industry. Third, the imposition of tariffs on imports are necessary for both revenue and protection purposes. Finally, immigration during the transition period will reduce the labor force, which in turn will negatively effect the country's economy. |
