Policy lessons from trade-focused, two-sector models
TL;DR: Moreovei et al. as discussed by the authors describe how to specify, solve, and draw policy lessons from small, two-sector, general equilibrium models of developing countries, which capture the essential mechanisms by which external shocks and economic policies ripple through the economy.
About: This article is published in Journal of Policy Modeling.The article was published on 1990-12-01. It has received 203 citations till now. The article focuses on the topics: External sector & Terms of trade.
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TL;DR: In this article, the authors conduct a preliminary analysis of the macroeconomic effects of the AIDS epidemic for South Africa using an economy-wide modeling framework and generate alternative medium-term scenarios to simulate the quantitative impact of these AIDSrelated effects on macroeconomic performance.
Abstract: South Africa now stands at the brink of a full-blown AIDS crisis. The key question now is to how to deal with the impending crisis. The epidemic has moved beyond its earlier status as a health issue to become a development issue, with social, political, and economic dimensions. This paper focuses on the economic aspects. While the research and policy analysis agenda is large, the authors' objectives in this paper are more modest: they undertake a preliminary analysis of the macroeconomic effects of the AIDS epidemic for South Africa using an economy-wide modeling framework. The outline of the paper is as follows: First, the authors review the major channels through which the HIV/AIDS epidmeic affects economic activity. Next, they describe the analytic approach employed in this paper, which involves constructing a disaggregated model of the South African economy that embodies the important AIDS-economy linkages identified above. Finally, they use the model to generate alternative medium-term scenarios to simulate the quantitative impact of these AIDS-related effects on macroeconomic performance.
281 citations
Cites methods from "Policy lessons from trade-focused, ..."
...It has since become a standard feature in numerous applied models; see, for example, xe "Dervis, de Melo, and Robinson (1982)"Dervis, de Melo, and Robinson (1982) and xe "Devarajan, Lewis, and Robinson (1990)"Devarajan, Lewis, and Robinson (1990)....
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Book•
21 Feb 2011TL;DR: The CGE model database as discussed by the authors contains a social accounting matrix for the United States, 2004 $US billions and a CGE Modeling Exercise Answer Key (ECE) model.
Abstract: 1. Introduction to computable general equilibrium models 2. Elements of a computable general equilibrium model 3. The CGE model database: a social accounting matrix 4. Final demand in a CGE model 5. Supply in a CGE model 6. Factors of production in a CGE model 7. Trade in a CGE model 8. Taxes in a CGE model 9. Conclusion: frontiers in CGE modeling Modeling exercises Appendix. Social accounting matrix for the United States, 2004 $US billions Practice and review answer key Model exercise answer key.
267 citations
TL;DR: In this article, a survey of micro-macro computable general equilibrium (CGE) models that incorporate asset markets and product and factor markets is presented, and the theoretical problems such models face in reconciling micro-focused CGE models with macro models incorporating dynamic behavior.
180 citations
TL;DR: Arndt et al. as mentioned in this paper studied the impact of the AIDS pandemic on South Africa's economy and found that the effects of AIDS on unskilled and semi-skilled workers tend to depress output relatively more in sectors that use unskilled labor intensively.
Abstract: South Africa is currently confronting an HIV/AIDS crisis. HIV prevalence in the population is currently estimated at about 13 per cent with that number projected to increase over the next five years or so. Given the massive scale of the problem and the concentration of effects on adults of prime working age, the pandemic is expected to sharply influence a host of economic and non-economic variables. While the pandemic will certainly influence the rate of economic growth, structural changes are also likely to be one of the primary economic hallmarks of the AIDS pandemic.
This paper builds on the work of Arndt and Lewis (2000) who estimated the aggregate macroeconomic impacts of the HIV/AIDS pandemic in South Africa using a computable general equilibrium (CGE) approach. They found that, despite dramatically lower rates of growth of the unskilled labor pool relative to the ‘no AIDS’ trend, estimated unemployment rates for unskilled labor in their base ‘AIDS’ scenario increased absolutely over most of the upcoming decade and are essentially the same (slightly higher in fact) as the rates estimated for a fictional ‘no AIDS’ scenario. In this paper, we seek to further investigate the interactions between unemployment and AIDS using the basic modeling approach set forth in Arndt and Lewis.
Before projecting the impacts of the pandemic on unemployment, recently compiled historical data on employment, unemployment, and remuneration are presented. The unemployment problem is, rather, an employment problem; and it is concentrated primarily in the unskilled and semi-skilled labour category. Job creation performance over the past three decades in this category has been dismal with total employment (formal sector and informal sector) of unskilled and semi-skilled labourers in 1999 at only 92 per cent of the level present in 1970.
In a country with an extraordinarily complex historical legacy such as South Africa, it is impossible to attribute this disastrous job creation performance to any single factor. Nevertheless, large differences in remuneration trends across labor classes and standard economic theory point to these trends as major contributing factors. By 1999, real remuneration per unskilled and semi-skilled worker had grown to 250 per cent of the 1970 level while remuneration for other categories had remained essentially flat. Based on these data, the neoclassical conclusion that unskilled and semi-skilled labor has been systematically pricing itself out of the market seems practically unavoidable. Employment growth has, given slow economic growth rates, gone hand in hand with wage moderation as in the highly skilled and skilled segments. In contrast, employment compression has been associated with substantial real remuneration growth as in the unskilled and semi-skilled segment.
With this historical background in mind, we turn to examining the interactions between the AIDS pandemic and unemployment using a CGE approach. In the model, the unskilled and semi-skilled wage is fixed relative to the producer price index. As a result, employment levels by activity are the equilibrating variables. We find that, even though the pandemic is projected to drive growth rates in the supply of unskilled and semi-skilled labour to around zero, our analysis indicates that the pandemic will also depress labour demand leaving the unemployment rate, in our base ‘AIDS’ scenario, essentially unchanged compared with a fictional ‘no AIDS’ scenario. The pandemic depresses labour demand through three effects.
Declines in the rate of overall economic growth.
Pronounced declines in sectors that supply investment commodities, particularly the Construction and Equipment sectors. These two sectors happen to use unskilled and semi-skilled labour intensively and together account for a significant share (16.3 per cent) of total payments to this category of labour.
Beyond this investment demand effect (brought on by reduced savings), AIDS induced morbidity effects on unskilled and semi-skilled workers tend to depress output relatively more in sectors that use unskilled and semi-skilled labour intensively with further negative implications for employment.
Countering these three effects will be key to palliating the negative economic consequences of the pandemic and reducing unemployment rates. To reduce the unemployment problem, South Africa must have rapid overall economic growth ideally with sectors that use unskilled and semi-skilled labour intensively leading the way. Results indicate that a policy of real wage moderation (or even modest decline) presents a straightforward option for bolstering overall economic growth. A wage moderation policy also provides a particularly large stimulus for sectors that use unskilled and semi-skilled labour intensively with further positive implications for employment. Copyright © 2001 John Wiley & Sons, Ltd.
171 citations
TL;DR: In this article, the authors present the simplest possible general-equilibrium model of an open economy in which producer and consumer decisions are both intra-and intertemporally consistent.
167 citations
Cites background from "Policy lessons from trade-focused, ..."
...As has been shown elsewhere in the context of a static model (Devarajan et al., 1990), this is the minimal number of goods required to capture the salient aspects of an open economy....
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References
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01 Mar 1969
TL;DR: In this article, Solow et al. present an approach for the analysis of the variation of a flux commercial particulier entre pays in the context of recherche.
Abstract: Cette A©tude offre un appui thA©orique A certaines pratiques de recherche selon lesquelles la variation d'un flux commercial particulier entre pays est considA©rA©e comme la rA©sultante de deux A©lA©ments: la modification qui se produirait si le pays fournisseur donnA© devait conserver sa part du marchA©, et l'A©cart entre les ventes effectives et celles qui s'effectueraient si sa part du marchA© demeurait constante. Ces pratiques comprennent la mA©thode de prA©vision des A©changes dans laquelle: 1) les prA©visions de l'expansion des divers marchA©s, combinA©es avec une matrice relative A la pA©riode courante, fournissent une matrice pour la pA©riode future A©tablie sur la base de parts du marchA© constantes; 2) cette matrice A©tablie sur la base de parts du marchA© constantes est modifiA©e pour tenir compte de facteurs censA©s engendrer des gains ou des pertes de parts. Dans la prA©sente A©tude, on fait valoir que l'analyse des modifications des flux commerciaux en deux A©lA©ments reprA©sentant, l'un des parts du marchA© constantes et l'autre des parts du marchA© modifiA©es, n'intA©resse pas seulement la comptabilitA©, mais qu'elle peut certainement Aatre rattachA©e purement et simplement A la thA©orie traditionnelle du comportement des consommateurs. On part de l'hypothA¨se que les produits sont diffA©renciA©s non seulement d'aprA¨s leur espA¨ce mais A©galement d'aprA¨s leur origine. Autrement dit, on suppose que des produits originaires de diffA©rents pays et offerts concurrement sur le mAame marchA© ne sont pas susceptibles de se remplacer parfaitement. Il est dA©montrA© ensuite qu'une spA©cialisation poussA©e et suffisamment rA©aliste de la fonction de bien-Aatre de Hicks permet d'obtenir des A©quations assez simples de la demande englobant les deux A©lA©ments mentionnA©s plus haut. Cette spA©cialisation se fonde sur l'hypothA¨se "d' indA©pendance" (telle qu'elle a A©tA© formulA©e par R. M. Solow, R. H. Strotz et d'autres) ainsi que sur celle selon laquelle les A©lasticitA©s du remplacement entre produits offerts concurremment sur un marchA© quelconque donnA© sont constantes et A©gales. /// Este estudio ofrece un apoyo teA³rico a ciertas prAicticas de investigaciA³n segAon las cuales a la variaciA³n en una corriente determinada de intercambio entre paAses se la considera como la suma de dos componentes: la variaciA³n que ocurrirAa si un paAs vendedor dado mantuviera su participaciA³n en el mercado, y la desviaciA³n de las ventas efectivas con respecto a las ventas que tendrAan lugar de permanecer constantes las participaciones. Dichas prAicticas incluyen la previsiA³n de los intercambios, en la cual 1) los pronA³sticos del crecimiento en diversos mercados, junto con la matriz de un perAodo de base, resultan en una matriz de participaciones constantes para el perAodo futuro, y 2) se modifica esta matriz de participaciones constantes para tener en cuenta a los factores que se espere que produzcan pA©rdidas o ganancias en las participaciones. En este trabajo se mantiene que el anAilisis de las variaciones en las corrientes de intercambio comercial, separando el componente de participaciones constantes y el de ajuste de las participaciones, es mAis que una simple cuestiA³n de contabilidad, y en realidad se le puede ligar sencilla y rigurosamente a la teorAa tradicional del comportamiento del consumidor. El punto de partida es el supuesto de que se establecen distinciones no solamente segAon la clase de los productos sino tambiA©n segAon el lugar de producciA³n de los mismos. Es decir, se supone que los productos de distintos paAses que compiten en el mismo mercado son sustitutos imperfectos. Se demuestra luego que una especializaciA³n eficaz y bastante realista de la funciA³n hicksiana del bienestar lleva a relaciones de demanda muy sencillas en las que se incluyen los componentes de la participaciA³n constante y del ajuste de las participaciones. Esta especializaciA³n exige el supuesto de "independencia" (que formularan R. M. Solow, R. H. Strotz, et al.) y el supuesto de que las elasticidades de sustituciA³n entre los productos que compiten en un mercado determinado son constantes e iguales.
4,424 citations
"Policy lessons from trade-focused, ..." refers background in this paper
...’ Following this treatment, we assume the composite commodity is given by a constant elasticity of substitution (CES) aggregation function of A4 and D, with substitution elasticity o. Consumers maximize utility, which is equiv- ‘See Armington (1969)....
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TL;DR: JuMP is an open-source modeling language that allows users to express a wide range of ideas in an easy-to-use manner.
Abstract: The most widely used is GAMS, which is specifically designed for Further details on GAMS can be found in the GAMS User's Guide. The GAMS User's Guide. Mathematical Programming, 87:153–176, 2000. (4). A. Brooke, D. Kendrick, and A. Meeraus. GAMS: A User's Guide. The Scientific Press, South San Francisco. JuMP is an open-source modeling language that allows users to express a wide D. Kendrick, A. Meeraus, and R. Raman, GAMS: A User's Guide, Scientific.
3,645 citations
Book•
01 Jan 1982
TL;DR: A comprehensive survey of multisector, economy-wide planning models weighing their power to address issues of trade, distribution, growth, and structural change is presented in this paper, where the authors combine theoretical discussion of the properties of applied equilibrium models with numerical applications to particular countries, and problems.
Abstract: This comprehensive survey of multisector, economy-wide planning models weighs their power to address issues of trade, distribution, growth, and structural change. The authors combine theoretical discussion of the properties of applied equilibrium models with numerical applications to particular countries, and problems. The models consider ranges from input-output and linear programming to the more recent nonlinear computable general equilibrium models. The authors examine how these models can be used to measure growth and structural change, to select an appropriate foreign exchange regimen, and to evaluate the impact of alternative development strategies on the distribution of income. The empirical applications draw on the experience of particular countries, and comparisons among countries to demonstrate how such models provide a useful framework for policy analysis. Particular attention is given to the difficulties of formulating plans and policies in mixed-market economies and to the problems of capturing the real constraints on policymakers within the abstractions of a model.
1,388 citations
Book•
30 Sep 1985
TL;DR: The Social Accounting Matrix (SAM) as discussed by the authors is a technique for capturing the details of disaggregated national accounts, in which data are displayed in single-entry matrix format, rather than in the traditional form of double-entry bookkeeping.
Abstract: The established technique for capturing the details of disaggregated national accounts is the social accounting matrix, or SAM, in which data are displayed in single-entry matrix format, rather than in the traditional form of double-entry bookkeeping. The data base embodied in the SAM can then serve as a statement of initial conditions in an economy and as a starting point for theoretical analysis of the mechanics of growth or the likely effects of policies. A particular feature of this approach is that the SAM structure graphically demonstrates the interconnection between the distribution of living standards and the structure of production in an economy. This report covers three broad areas of concern in social accounting. First it describes the methodology of SAMs as a discipline within economic statistics and gives a comprehensive, nontechnical introduction to the subject. Then it recounts the experiences of Sri Lanka, Swaziland, and Botswana in constructing, maintaining, and using SAMs. Finally, it illustrates the step from data systems to models in a SAM context.
569 citations
515 citations
"Policy lessons from trade-focused, ..." refers background in this paper
...Recognizing these problems, Salter (1959) and Swan (1960) specified a two-sector model that distinguishes “tradables” (including both imports and exports) from “nontradables....
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