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\.. changes for Scenario A and B respectively are $1.55 million and -$3.09 million. Overall national efficiency impacts depend on whether the expansion in thermal generating capacity is a net addition to the level of economic activity or is a simple transfer from other sectors in the national economy. VIII. Exclusion Process and Conclusion The applied general equilibrium approach forces recognition of potential offsetting effects as resources are reallocated to preserve critical habitat for endangered species. Thus, in the Colorado River study, the flow changes required for the endangered fishes decreases agricultural activity in the upper basin of the Colorado River but increases this activity in the lower basin. A partial equilibrium analysis ignores such effects. Further, reallocating water uses causes some activities to decline while others increase. The partial equilibrium analysis omits such effects. The exclusion process utilizing the economic analyses for both the Colorado and Virgin studies resulted in all of the proposed critical habitat being designated. No areas were excluded for economic reasons. The economic impacts associated with critical habitat designation arise from the required resource reallocation. The impacts are typically regional, rather than local, and thus necessitate regional economic modeling. The appropriate modeling framework must capture both the aggregate and distributional consequences resulting from resource reallocation caused by the designation of critical habitat. Applied general equilibrium models, either input-output (1-0) models or computable general equilibrium (CGE) models, are suitable for these purposes. Partial equilibrium models are inappropriate as they assume that resources not employed in the sectors constrained by the critical habitat will simply cease to exist instead of being reallocated within the regional economy. By the same token, focus on local impacts will obscure potentially offsetting (or magnified) impacts at a regional level. Applied general equilibrium models circumvent this problem by explicitly incorporating the resource reallocation within the regional economy. 38