A general equilibrium analysis of the economic aspects of the imposition of an export tax on the plywood sector in Indonesia

Computable general equilibrium (CGE) models are extensively used to simulate the economic impact of forest policies. In this study, we conduct a counterfactual analysis to assess the impact of an export tax ranging from 5 to 20% on the plywood sector to the Indonesian economy. The indonesian economy is aggregated into 5 sectors: 2 sectors are related to forest,i.e., (1) log, and (2) plywood. The other three sectors are not related to forest,i.e., (3) non-wood manufacturing, (4) agriculture, quarrying, and services, and (5) construction. The simulation results show that an export tax on the plywood processing sector is negatively correlated with real GDP and labor demand in log and plywood sectors, but is positively correlated with total labor demand, government revenue, income distribution, wood resources and social welfare. Reduction in labor demand by log and plywood sectors, due to a plywood export tax, can be absorbed in other sectors. The simulated policy of an export tax on plywood can reserve trees in production forests for future use.