Handbook of COMPUTABLE GENERAL EQUILIBRIUM MODELING

Transcription

1 Handbook of COMPUTABLE GENERAL EQUILIBRIUM MODELING VOLUME Edited by Peter B. Dixon Centre of Policy Studies, Monash University Dale W. Jorgenson Harvard University Amsterdam Boston Heidelberg London New York Oxford Paris San Diego San Francisco Singapore Sydney Tokyo North-Holland is an imprint of Elsevier

2 Contributors Preface xv xix 12. Global Applied General Equilibrium Analysis Using the Global Trade Analysis Project Framework 815 Thomas Hertel, Introduction: What Is GTAP and Why Has it succeeded? Design of the Standard GTAP Modeling Framework Model Validation and Systematic Sensitivity Analysis Software ah,d Implementation Issues GTAP-based Analysis of Global Economic Integration CGE Modeling of Global Environmental Issues Future Directions for GTAP 864 References Estimating Effects of Price-Distorting Policies Using Alternative Distortions Databases 877 Kym Anderson, Will Martin, Dominique van der Mensbrugghe Introduction Concern with Missing Price-Distorting Measures Concern with the Counterfactual z Concern with Tariff Aggregation ' Conclusions 927 References Modeling the Global Economy Forward-Looking Scenarios for Agriculture 933 Dominique van der Mensbrugghe Introduction _ Global Modeling at the World Bank Model Specification ' Macroeconomics of the Baseline Scenario Agriculture Towards Climate Change and Its Impacts Concluding Thoughts 986 Appendix 988 References 991

3 Contents 15. A Global Approach to Energy and the Environment: The G-Cubed Model 995 Warwick J. McKibbin, Peter J. Wilcoxen Introduction Structure of the Model Summary of Key Applications and Insights Sample Applications Conclusion 1062 References Integrated Economic and Climate Modeling 1069 William Nordhaus Introduction ( Dice and Rice Models as Examples of lams Illustrative Model Results: The Copenhagen Accord Some Major Issues for Research in IAM Final Thought* References An Econometric Approach to General Equilibrium Modeling 1133 Dale W. Jorgenson, Hui Jin, Daniel T. Slesnick, Peter J. Wilcoxen Introduction Econometric Modeling of Producer Behavior Application of the Kalman Filter Instrumental Variables and Specification Tests Empirical Results on Producer Behavior Econometric Modeling of Consumer Behavior Data Issues in Modeling Consumer Behavior, Aggregate Demands for Goods and Leisure Intertemporal Allocation of Full Consumption Computing Confidence Intervals Conclusions 1201 Appendix 1203 References Trade Elasticity Parameters for a Computable General Equilibrium Model 1213 Russell Hillberry, David Hummels Introduction Why do Trade Elasticities Matter? Import Demand Elasticities Export Supply Gravity, Trade Costs and Structural Estimation 1257 References 1267

4 Contents vii 19. Validation in Computable General Equilibrium Modeling 1271 Peter B. Dixon, Maureen T. Rimmer Introduction Checking the Code: Homogeneity Tests and Other Checking Simulations Validation Through the GDP Identity Validation Through Back-of-the-Envelope (BOTE) Analysis and Other Plausibility Checks Consistency with History Forecasting Performance Conclusion Appendix: Relationship Between the Percentage Changes in Output, Inputs and Technology Variables: Derivation of (19.12) and (19.15) 1327 References Solution Software for Computable General Equilibrium Modeling 1331 Mark Horridge, Alex Meeraus, Ken Pearson, Thomas F. Rutherford Introduction ' Early Days General-Purpose Software Levels and Change Solution Methods General Features of CGE Models \ Three Representations of a Simple Model Curse of Dimensionality ^ Checking and Debugging Models Comparing Features of GAMS and GEMPACK ~ Concluding Remarks 1377 References - : Income Distribution in Computable General Equilibrium Modeling 1383 Francois Bourguignon, Maurizio Bussolo Introduction Static Distribution Oriented Macro Micro Models Based on Walrasian CGE Static Macro Micro Distributional Models with Real or Apparent Labor Market Imperfections Dynamic Macro Micro Modeling ' GIDD Model as an Example of a Global Dynamic Macro-Micro Model ' Concluding Remarks 1431 References 1433

5 viii Contents 22. The New Keynesian Approach to Dynamic General Equilibrium Modeling: Models, Methods and Macroeconomic Policy Evaluation 1439 Sebastian Schmidt, Volker Wieland Introduction The New Keynesian Approach to Monetary Economics: A Brief History of Thought Building New Keynesian Models Methods for Model Solution and Estimation A New Approach to Model Comparison and Policy Evaluation Policy Evaluation and Robustness under Model Uncertainty Open Questions and Future Research 1499 Appendix 1502 References * Computing General Equilibrium Theories of Monopolistic Competition and Heterogeneous Firms 1513 Edward J. Balistreri, Thomas F. Rutherford Introduction " Trade Theories General Equilibrium Formulation Computation as a Companion to Theory Calibration Decomposition Strategy for Computation of Large Models ' Applications ' Conclusion 1551 Appendix A: Illustrative Partial Equilibrium Trade Models 1552 Appendix B: Illustrative General Equilibrium Trade Model 1557 Appendix C: Description of the GTAP Version 7-Based CGE Model 1562 References * Market Structure in Multisector General Equilibrium Models of Open Economies 1571 Joseph Francois, Miriam Manchin, Will Martin Introduction Oligopoly Monopolistic Competition " Model Selection and Validation Summary, 1597 References Computable General Equilibrium Modeling of Market Access in Services 1601 Elisabeth Christen, Joseph Francois, Bernard Hoekman Introduction Definitional and Data Issues 1604

6 Contents ix Conceptual Issues Implementation Issues Models of Services Liberalization Modes of Supply and Sector Specificity An Example Setting Future Research Priorities Conclusions 1637 References The Labor Market in Computable General Equilibrium Models 1645 Stefan Boeters, Luc Savard ' ~ Introduction A Classification of Labor-Market Related Questions Labor Supply Labor Demand Labor Market Coordination Welfare Analysis Conclusions 1711 References Generational Policy and Aging in Closed and Open Dynamic General Equilibrium Models ^ 1719 Hans Fehr, Sabine Jokisch, Manuel Kallweit, Fabian Kindermann, Laurence J. Kotlikoff Introduction Preliminaries: Modeling of Aging, Retirement and Idiosyncratic Income Risk Closed-Economy Model for Germany, Multiregional World Model ' Summary of Results 1789 Appendix A: Computational Appendix for the Stochastic Model 1791 Appendix B: Computation of the World Economy's Dynamic Equilibrium 1792 References 1797 Index-Volume IB Index-Volume IA 127 II

7 Contributors Preface xv xix 1. Introduction 1 Peter B. Dixon, Dale W. Jorgenson - ~" 1.1. Overview Single-Country Models Global Models Technical Aspects of CGE Modeling: Data, Parameter Estimation, Computation and Validation Current Cutting-Edge Methodological Areas 16 References The MONASH Style of Computable General Equilibrium Modeling: A Framework for Practical Policy Analysis. 23 Peter B. Dixon, Robert B. Koopman, Maureen T. Rimmer 2.1. Introduction Telling a CGE Story From Johansen to ORANI Extending Johansen's Computational Framework: The Mathematical Structure of a MONASH Model * Responding to the Needs of CGE Consumers: The Four Closure Approach Concluding Remarks 94 Appendix: Theoretical Justification for the Johansen/Euler Solution Method 96 References Computable General Equilibrium Assessments of Fiscal Sustainability in Norway 105 Erling Holmey, Birger Strom 3.1. Introduction ' ' Model Structure Evaluating Fiscal Sustainability Sensitivity of the Fiscal Prospects to Variations in Economic Growth and Terms of Trade 121 XI