Browsing by Subject "Allgemeines Gleichgewichtsmodell"

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A utility function based approach towards the modeling of migration in village equilibrium models
(2010) Kleinwechter, Ulrich
Village equilibrium models are computable general equilibrium (CGE) implementations of agricultural household models in a village equilibrium framework which have the salient feature of being able to capture general equilibrium effects arising at the level of rural communities. Due to the important role migration plays for livelihoods in developing countries, the approach has been successfully applied to analyze aspects related to migration and village economies. However, the depiction of migration in village equilibrium models is not carried out in a way that captures interactions between migration and household consumption demand while at the same time allows for an endogenous adjustment of the level of migration by the households themselves. Furthermore, approaches to modeling migration are purely demand side oriented. Supply side factors, such as differences between households, which may influence household responses to changes in incentives to migrate, cannot be accommodated in a theoretically convincing manner. To address these issues, a nonseparable household model with endogenous migration decisions and feedback to the consumption sphere is proposed as the theoretical foundation for a village equilibrium model. A composite utility function captures utility which accrues to the household through per capita household consumption of goods and leisure, on the one hand, and utility stemming directly from participation in different activities by the household including migration, on the other hand. It is shown that the allocation of labor among different activities is governed by the size of marginal returns to labor in terms of market returns, changes in household demand and (dis)utility of labor market participation relative to the household shadow wage. The practical implementation of the theoretical framework is achieved by the derivation of two independent demand systems from the composite utility function. A per capita linear expenditure system is proposed to depict household consumption demand. The allocation of labor to migration is assumed to follow a factor demand specification using power functions which translate utility considerations made by the household into imperfectly elastic responses to changes in incentives for participation in the labor market.
An integrated computable general equilibrium model including multiple types and uses of water
(2015) Luckmann, Jonas Jens; Grethe, Harald
Water is a scarce resource in many regions of the world and competition for water is an increasing problem. To countervail this trend policies are needed regulating supply and demand for water. As water is used in many economic activities, water related management decisions usually have complex implications. Economic simulation models have been proven useful to ex-ante assess the consequences of policy changes. Specifically, Computable General Equilibrium (CGE) models are very suitable to analyze the consequences of water-related management decisions, as they consider the interlinkages between different sectors and economic agents within an economy. However, so far there is no CGE model which provides a holistic picture of the water sector including all aspects of provision, demand and management. Against this background, in this thesis a CGE model (STAGE_W) is developed which is especially focused on the water sector and provides a generic, integrated and flexible framework to incorporate various water sources from which several water activities produce water commodities of differing quality. These are consumed by other activities or by households. The applications presented in this thesis are to the best knowledge of the author the first CGE approaches to depict the recycling of wastewater and the provision of brackish groundwater as independent activities. Another novelty of the model is that it is capable to depict cascading water use. Furthermore, the inclusion of several water specific taxation instruments allows for a wide range of water policy simulations. To demonstrate the capabilities of the model, STAGE_W is applied to a Social Accounting Matrix for Israel. Based on this database several case studies are conducted which are presented in three scientific articles. Israel provides an ideal example as the country is strongly affected by water scarcity and is also among the world leaders regarding the development of new water sources and technologies. In the first article, a literature review on previously existing approaches of water depiction in CGE models is provided along with a detailed description of the specifics of STAGE_W. The model is applied to simulate a reduction of freshwater resources. The effects of this shock are analyzed with and without further increasing the desalination capacity. The results show that the economic effects are slightly negative under both scenarios. Counterintuitively, the provision of additional potable water through desalination does not substantively reduce the negative outcomes. This is mainly due to the high costs of desalination, which are currently subsidized in Israel. The second article simulates an abolishment of the discriminatory water pricing system currently established in Israel. Instead, two alternative schemes are introduced: price liberalization, which unifies the prices for all potable water consumers at cost recovery rates, and marginal pricing, lifting the potable water price to the cost of desalination. It is found that both schemes yield a double dividend by simultaneously saving water and increasing economic growth. Thereby, marginal pricing allows for larger water savings while price liberalization results in higher economic growth. In the third article, the model is further refined: the quantity of sewage available for reclamation is linked to the water consumption of economic entities connected to a sewer system. This allows to depict cascading water use and to endogenously estimate the marginal value of unpurified sewage. It is shown that a consideration of this link is crucial, if a high share of potable water is reclaimed and used. In this case, reducing the potable water consumption of municipalities also negatively affects the availability of reclaimed wastewater and thereby reduces its potential as a substitute for potable water. These case studies provide evidence of the validity of the model developed. The model results cannot necessarily be anticipated, as they are the outcome of complex interrelations within the model and none of the previous models has the capacity to capture all the relevant aspects of the water sector which influence these outcomes. Therefore, it is concluded that STAGE_W constitutes a helpful tool to implement a more sustainable management of water resources, allowing policy makers to ex-ante estimate the economy-wide effects of water related decisions. As the whole economy is depicted, a more holistic picture of effects resulting from changes in the water sector can be drawn in comparison to single sector models or cost-benefit analyzes.
Assessing the impact of data disaggregation level and non-tariff barriers in regional trade agreements utilizing the Global Trade Analysis Project Framework
(2015) Bektasoglu, Beyhan; Brockmeier, Martina
Computable general equilibrium (CGE) models have been extensively used by economists for trade policy analysis due to their ability to quantify the impact of a shock on an entire economy. Providing economy-wide numerical results, and including linkages and interactions among main economic variables, agents, sectors, and regions make CGE models preferable in addressing a wide range of economic problems. Among various comparative static, multi-sector and multi-region general equilibrium models, Global Trade Analysis Project (GTAP) is one of the most extensively used. However, despite the widespread use of CGE models in trade policy analysis, there are still debates among researchers about the right choice of the model to apply. The discussions are frequently about the data aggregation level. The degree of data disaggregation within the CGE models has direct impact on policy simulation results stemming from the aggregation bias. Against this background, one of the focal points of this dissertation is the impact of aggregation bias occurring in GTAP simulations and the reasons behind this bias. Another focal point of this dissertation is the estimation of the ad-valorem equivalents (AVEs) of non-tariff barriers (NTBs) on food and agricultural sector through gravity approach and their subsequent implementa-tion into the GTAP framework for thorough analysis of regional trade agreements (RTAs). With the increas-ing number of economic integration agreements and multilateral trade negotiations of the World Trade Or-ganization, the importance of import tariffs has declined, while that of NTBs has risen, since NTBs are hard-er to address due to their complex structure. However, the welfare gains through the reduction of restrictive NTBs due to RTAs are not negligible. We either use the border effect approach or the free trade agreement (FTA) approach to identify NTBs in the trade between respective countries. NTBs are originally not consid-ered in the standard GTAP framework. However, they can be implemented into the GTAP model in several ways (i.e., as export taxes, import tariffs or as efficiency losses) depending on the policies with which they are related. Due to our focus on the agro-food sector in our articles and the predominance of technical NTBs on this sector, we mainly account for the efficiency-decreasing effect of NTBs. Hence, we model a majority of them using the efficiency approach. For the remaining part of trade costs we utilize the import-tariff ap-proach. In this context, the objective of this cumulative dissertation is threefold: (1) to reveal the impact of data ag-gregation level in trade policy analysis with the GTAP framework, (2) to expose the importance of NTBs in the evaluation of RTAs, (3) to demonstrate the effect of data aggregation level in gravity estimates of NTBs and its subsequent impact on trade policy simulations. Hence, this dissertation consists of four articles which are published or submitted to journals. In our first article entitled "Model Structure or Data Aggregation Level: Which Leads to Greater Bias of Results?", we focus on two fundamental characteristics of CGE models, i.e., the model structure and the data aggregation level. Our results demonstrate that there are substantial differences in results due to the use of GE or PE model structure or data disaggregation level. However, the deviations in results caused by sectoral breakdown are much more pronounced than those stemmed from the model structure. While the economy-wide setting of GE models causes differences across the results of GE and PE models, tariff averaging and false competition ground the reason for deviations in results due to data aggregation level. Following our theoretical work in the first article, in our second article, "Moving toward the EU or the Mid-dle East? An Assessment of Alternative Turkish Foreign Policies Utilizing the GTAP Framework", we focus on more applied analysis. In this article, we analyze Turkeys two different policy options by considering the simultaneous elimination of NTBs and import tariffs in the case of Turkeys membership either to the Euro-pean Union (EU) or Greater Arab Free Trade Area (GAFTA). For both experiments, gains from NTB re-moval outweigh the gains due to the elimination of import tariffs. Hence, based on our simulation results, we are able to confirm the importance of NTBs in the evaluation of RTAs. After indicating the importance of aggregation bias in our first article and confirming the impact of NTBs in the evaluation of RTAs in the second, in our third article, "The Effect of Aggregation Bias: An NTB-Modelling Analysis of Turkeys Agro-Food Trade with the EU", we expound the magnitude of aggregation bias in the calculation of AVEs of NTBs. Our estimations demonstrate that using aggregated gravity model to estimate the AVEs of NTBs results in overestimation of trade costs. Hence, the transfer of overestimated trade costs to the GTAP model also leads to overestimation in the simulation results of the EUs extension to include Turkey. Our last article, "Keep Calm and Disaggregate: The Importance of Agro-Food Sector Disaggregation in CGE Analysis of TTIP", is designed as a follow-up to our first article; however, it also includes the key find-ings from the second and third articles. We create five different versions of the GTAP database, which are aggregated at different sector levels. Thereafter, we simulate the Transatlantic Trade and Investment Partner-ship (TTIP) between the EU and the United States (US). In addition to what we constructed in our first arti-cle, in this article we also consider the reduction NTBs for each version of the GTAP database. Hence, in addition to averaging of tariffs and false competition, estimation of AVEs of NTBs at different data aggrega-tion levels also has an impact on deviations in simulation results across five versions of the GTAP database. As we have presented in our articles, the use of higher data disaggregation level commonly results in greater welfare and trade effects, but cases also exit in which more aggregated version of the GTAP database leads to larger changes in simulation results. The atheoretic method of trade-weighted tariff aggregation given in the GTAP database is the trigger of lower trade and welfare effects. By calculating of the Mercantalistic Trade Restrictiveness Index (MTRI) for bilateral import tariffs, and comparing them with the initial trade-weighted tariffs in the GTAP database, we are able to verify the underestimation effect of "tariff averaging". In contrast, "false competition" causes overestimation of trade and welfare effects when higher level of data aggregation is used in the simulations. False competition arises in such situations when competition for a particular subsector does not initially exist between two exporting countries, but this subsector can be aggre-gated with others in which competition actually exists. Hence, this situation leads to wrongly applied weights, and results in false substitution effects, which causes overestimation of results. The estimation of AVEs of NTBs at higher data aggregation levels also reduces the variation across sectors, and commonly leads to higher trade and welfare results. However, the contribution of tariffs to the deviation of results across versions is generally higher than the contribution of NTBs. Hence, based on our simulation results, we exhibit that aggregation of tariffs is more important than the NTBs. This dissertation concludes that neither the impact of aggregation bias nor the importance of NTBs in the evaluation of RTAs on trade policy analysis is negligible. There are considerable differences across simula-tion results depending on the data aggregation level used. The differences in results occur both in the estima-tion of trade costs of NTBs and also in the policy simulation results on the GTAP level. Hence, the selection of data aggregation level can be critical for thorough analysis of trade agreements, especially for the detailed examination of policy changes at the product level. Aggregation bias cannot be entirely overcome in econo-metric estimates or in CGE analysis; however, the extent of its possible effect can be born in mind. Depend-ing on the aim of the policy analysis, the appropriate level of data disaggregation should be chosen.
Degree of Openness and the Choice of Exchange Rate Regimes: A Re-Evaluation with Value-Added Based Openness Measures
(2005) Wang, Lars; Belke, Ansgar
The concept of trade openness is broadly applied as a potential predictor in numerous empirical studies, despite the fact that no commonly accepted approach of measuring openness has been developed. The most widely applied (?traditional?) openness indices are not able to accurately calculate the degree of trade openness. Many openness concepts try to adjust the traditional measures of openness with aim to increase the quality of assessment, but most of these attempts show a poor correlation with the traditional concept. This might indicate that the alternative approaches capture different aspects of trade openness. This study presents the development of innovative value-added based (?actual?) measures of openness towards international and bilateral trade, respectively. They are based on a multi-regional input-output analysis of income effects due to trade. In clear contrast to the mainstream view, the actual openness concept corrects the traditional concept by expressing trade in value-added terms instead of gross terms. Traditional openness measures do not take the international redistribution of income generated by trade into account. This means, for example, that the export ratio overstates the potency of a country to build a surplus in output at home because imported intermediate commodities that are employed in the process of production of exported commodities generate income abroad. The import ratio which expresses imports as a share of the gross domestic product overstates the dependency on imports since residents have to spend a lower portion of their income to purchase imports from abroad. Imports are partly produced with intermediate commodities delivered by the country that creates income for its production factors. The innovative actual openness concept is able to reflect the different structures of production among countries since the value-added created by trade is forecasted based on a sound theory of production. This makes it possible to quantify the effects of the interactions between industries within an economy. Open economies consist of more firms that import intermediate of final commodities for the purpose of their re-export than closed economies. These firms, which redistribute final commodities or process the finishing of imported intermediate commodities, employ less domestic factors of production and thus contribute less to national income than other firms which produce exports primarily with national intermediate commodities in all processing stages. This means that the more open economies are, the smaller the proportion of domestic production factors in the production process of exports is and the additional income earned from the selling of exports is again transferred abroad by means of imported intermediate commodities employed in exports. There are only a limited number of degrees of trade openness data bases based on concepts of openness measurement that differ to the traditional approach. They only include data for a few countries, which mainly consist of industrialized economies, and/or only for a small number of years. Consequently, the outcome of empirical tests of potential associations between the degree of openness and other variables might be, in some cases, hampered. In clear contrast to this, the new data base of the degrees of openness to international trade based on the actual openness concept consists of roughly 20,000 entries. The data base represents the degrees of trade openness of 66 countries, which range from developing to highly industrialized economies, for a period of 14 years (1989 to 2002). This feature of the study is a strong contribution to economic research since it makes the improved adequacy in the indication of trade openness available to many different empirical analyses. The empirical re-evaluation of the association between the degree of openness and the choice of exchange rate regimes in this contribution is based on regression analysis which contains up to 525 observations of 54 countries between the years 1989 and 2000. The test results indicate a positive and statistically significant correlation between trade openness and the likelihood of choosing a fixed exchange rate regime. This is clearly in line with the findings of the mainstream in the empirical research. Subsequently, the analysis of the relationship between the degree of trade openness and the selection of exchange rate regimes is extended to adhere to the ongoing debate in economic research as to when the Central and Eastern European countries (CEECs), which became member countries of the Economic and Monetary Union in May 1, 2004, are able to adopt the euro as their national currency. The results of a computable general equilibrium analysis suggest that if the Central and Eastern European countries meet the Maastricht criteria and the non-devaluation condition in the Exchange Rate Mechanism II, they could gain net benefits from the abolishment of their national currencies in the year 2008.
Domestic support payments and trade distortions : the neglected issue in global general equilibrium modeling
(2016) Urban, Kirsten Gunver; Brockmeier, Martina
The domestic support payments provided to agricultural producers are frequently the subject of heated debate because they distort industry and trade structures causing efficiency losses and welfare redistribution. In recent years, high-income countries have initiated several reforms of their agricultural policies to decrease such distortions. These reforms are partly enforced by the requirements to reduce distorting domestic support, as agreed upon by the World Trade Organ-ization (WTO). A prominent example of such a heavily criticized policy is the agricultural sup-port of the Common Agricultural Policy (CAP) of the European Union (EU). In 2005, the EU introduced the Single Farm Payment (SFP), which is supposedly decoupled from production, to decrease the production stimulating effects of its CAP, and thus to reduce the distortions caused by the domestic support payments. However, these policy instruments are also contro-versial because the extent to which decoupled payments, such as the SFP, distort trade is still unclear. Domestic support provided to agricultural producers comprises a multitude of different and country-specific agricultural policy instruments, which makes it difficult to analyze the corresponding effects on domestic and third countries’ industry structure, trade, and welfare. The most common approach for evaluating the impacts from alternative policy options is based on Computable General Equilibrium (CGE) models. Nevertheless, the attention to detail re-garding the complex structure and country specific properties of domestic support, and in par-ticular the SFP, in such models has been largely neglected. Objective of this cumulative thesis is to analyze the effects of domestic support payments on industry output, international trade and welfare, with a particular focus on the impact of vary-ing assumptions of the SFP’s degree of decoupling in CGE modeling. Furthermore, this thesis aims to evaluate the trade-distorting effect of domestic support over time and provide a cross-countries comparison. Therefore, the standard Global Trade Analysis Project (GTAP) modeling framework is ex-tended to enable a much more detailed representation of domestic support payments based on the OECD Producer Support Estimate (PSE) database and considering the requirements re-garding production that trigger the eligibility for specific subsidies. Applying a complex updat-ing procedure, using the EU CAP as an example, a set of 21 databases accounting for various assumptions about the SFP’s degree of coupling to output levels is created. These databases are then used to investigate the extent to which various assumptions of the SFP’s degree of decou-pling and the corresponding modeling cause differences in results when a 100% removal of the SFP is simulated. In addition, a theoretically sound index based on the Mercantilist Trade Re-strictiveness Index (MTRI) is developed that measures the overall trade effects of domestic support in a general equilibrium framework. The new index named “MTRI of domestic support payments” (MTRI-DS) enables the measurement of the trade restrictiveness of domestic sup-port payments over time and across countries. Analyses’ results show: • Strong impacts of the SFP on factor allocation and thus industry output, market prices, trade structure and welfare in EU member states. • Significant variations due to alterations in the assumptions underlying the SFP’s de-gree of decoupling. • A decrease in trade distortion caused by the implementation of decoupled support in the EU. Thus, the MTRI-DS provides an appealing measure for evaluating the effects of agricultural policy reforms by summarizing the changes in the composition of domestic support payments, and thus, it might be of particular use in the support of trade negotiations.
Factor mobility and heterogeneous labour in computable general equilibrium modelling
(2014) Flaig, Dorothee; Grethe, Harald
The representation of labour markets in Computable General Equilibrium (CGE) models is characterised by a trade-off between data representation and data availability. Models are by definition abstract and simplified pictures of the real world: as a map of scale 1:1 does not help to find an unknown destination, a model which perfectly depicts the real world would hardly help to analyse adjustment effects of policy changes or macroeconomic shocks. When the analysis is focused on distributional issues, it seems obvious that such an analysis can only be based on models that differentiate at least more than one household group. Household groups characteristically differ in factor endowment and since factor income– besides price effects – is a main determinant of welfare analysis, the specification of labour markets crucially determines the analysis. There are mainly two possibilities to specify the labour market in a CGE model: First, the labour market can be set up as competitive market with perfect substitutability between individual workers on that market. With this setup, wages must be equal among labour types and sectors because every difference in wages provokes adjustments, which finally equalise wages again. In contrast, data reports typically significant wage differences between labour types that can only originate from imperfect labour markets. Thus, the second option is to depict these wage differences by imperfect substitutability of individual workers in the production process. But data on substitution possibilities of labour demand between different labour types is weak and estimations of substitution elasticities are in most of the cases not available. Meanwhile, in the real world, wages differ in various dimensions and in models labour types are typically differentiated by age, gender, skill level or occupation. When differentiating labour types within these dimensions, wage differences become possible and can be explained by transformation limitations between characteristics: e.g., wage differences between female and male workers are originating from the fact that female workers cannot become male workers. This differentiation has the effect that in most of the models, transformation between the characteristics of a dimension is no longer possible and workers stay in a specific labour type. Typically labour types are not differentiated by sector of employment and, thus, are assumed homogeneous amongst sectors. Movement of workers between sectors seems possible; nevertheless, data reports partly huge wage differences between different sectors of an economy. As a solution, CGE models typically include an efficiency parameter which allows calibrating the model according to the data, but the model assumes still homogeneous labour which should be priced equal. Thus, the efficiency parameter does not economically explain the existence of these wage differences. This thesis presents a comprehensive and flexible framework to introduce imperfect factor markets in CGE models. Labour mobility between labour types is controlled by migration functions where the degree of mobility is controlled by elasticities that govern the responsiveness of migration to changes in relative wages. Finally, the model provides the user with three additional instruments to control the operation of labour markets. First, the user can control the stock flow relationship for each labour type, e.g., does a migrating worker keep her productivity from the initial activity, adopt that of the destination activity or something in between; second, the user controls the flexibility of the labour market by setting the migration elasticities between activity blocks; and third, the setting of adjustment parameters determines the (assumed) costs of migrating. The analysis of productivity effects and costs of factor reallocation emphasises the relevance and influence of labour market specifications on model outcomes. Thus, this thesis sets the base for a careful setup and test of labour market assumptions applied in CGE models.
Village level impacts of trade reform in China
(2011) Kleinwechter, Ulrich; Grethe, Harald
During the past decades, China has carried out ambitious economic reforms. The reforms have resulted in strong economic growth and considerable reductions in poverty. The current situation, however, is also characterised by rising tensions within the country, caused, among others, by rural-urban and inland-coastal disparities. In this situation, rural-urban migration occupies central stage, both for the livelihoods of rural households and for the outcome of further policy reforms. In this context, trade liberalisation for a number of reasons can be expected to play an important role for the future development of poverty and inequality in the country. Against this background, the present work analyses and assesses the impacts of further trade liberalisation efforts on a rural community in south-western China. Recognising the importance of these issues, emphasis is put on poverty, inequality and rural-urban labour migration. Subject of the analysis is a village located in one of the less developed counties of Guizhou province. Thereby, this village level case study aims not only at shedding light on the impacts of future trade reforms on this particular village, but also has the objective of providing more general insights into the mechanisms which are at work when trade policies are brought down to a local level. The study seeks to promote an enhanced understanding of relevant processes in similar settings, allowing for improved assessments in the field of development oriented trade policy analysis. The objectives of the study are achieved by the application of a village computable general equilibrium model embedded into a macro-microsimulation framework. In this framework, aggregate results from a national level CGE study of unilateral trade liberalisation in China are administered as a policy shock to the village model, which offers a highly disaggregated picture of the village economy and allows for a detailed analysis of the impacts of the reform. The village model which is a CGE representation of the village economy forms the core part of the present study. The households which make up the village community are depicted by six representative household groups, each of them represented by an agricultural household model. The six groups stratify the village population by household demographics and income levels, thus distinguishing the households by their migration behaviour and by relative poverty. Each representative household can carry out up to four productive activities: agriculture, formal and informal local off-farm work as well as migration. Agricultural production is modelled with a nested Leontief-Cobb-Douglas technology. Household consumption is represented by a per-capita LES which includes self-consumption of agricultural output, purchased goods as well as leisure. By incorporating the assumption of a perfectly neoclassical village land market, the model makes a step towards the modelling of land rental transactions which take place within the village. The land market links the households together and creates local general-equilibrium effects which greatly affect the outcome of the policy reform. The salient feature of the village model is a novel approach towards the modelling of the households' labour allocation behaviour, and in particular the migration behaviour. The approach takes into account household preferences towards work in different types of employment as well as feedback links between household migration and consumption demand. This is achieved by the assumption of a composite utility function, which defines the behaviour of each household in the model. The composite utility function consists of a consumption utility function, which captures utility created by commodity consumption, and a labour utility function, which allows to account for the utility or disutility associated with the participation in different types of employment. By considering the disutility arising from certain employment options, the current work offers an important contribution to the methodological development of agricultural household and village equilibrium modelling. It provides a modelling framework, which paves the way for similar applications in different settings and opens an interesting field for future applications, which may also extend to levels of higher regional aggregation. At the same time, the model constitutes a highly valuable tool for the analysis of the migration behaviour of rural households under different policy scenarios along the lines of household demographics and income levels. Thereby, the availability of transparent information on socio-economic characteristics of the household groups, the remittances behaviour as well as the disutility connotations of migration offer great support to such efforts. Not least, it allows deriving theoretically sound hypotheses on the migration behaviour of rural households in different policy situations.