The Impact of the Local Green Economy of Ghana: A General Equilibrium Analysis

Abstract

The Ghanaian forestry sector has experienced a paradigm shift toward resilient and sustainable forest management practices through climate change mitigation and adaptation policies. Ghana has acknowledged the urgent need to address these issues via comprehensive policy measures as a nation that is vulnerable to the adverse effects of climate change. To assess economy-wide impacts, this paper employs a computable general equilibrium with a static specific factor model that can be readily simulated with various vectors of price changes. The model uses a competitive production structure that assumes constant returns, full employment, competitive pricing, and perfect labor mobility across sectors. Factor shares, industry shares, and substitution matrices from 2022 Labor Force Report’s data were constructed for four skilled groups (managers, professionals, service, and production) across industry, service, the rest of agriculture, and forestry sectors. Predictions of price increases from climate change mitigation policies compliance were simulated for the long run and short run. Forestry, agricultural, and industrial sectors will enjoy higher prices under a green economy, but these would not translate into higher wages. It is rather capital owners in agriculture and forestry that would benefit. Wage adjustments to the green economy are smaller than what might be expected in a partial equilibrium model.