Ramon Marimon and Andrew Scott (eds)
- Published in print:
- 2001
- Published Online:
- November 2003
- ISBN:
- 9780199248278
- eISBN:
- 9780191596605
- Item type:
- book
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/0199248273.001.0001
- Subject:
- Economics and Finance, Macro- and Monetary Economics
Macroeconomics increasingly uses stochastic dynamic general equilibrium models to understand theoretical and policy issues. Unless very strong assumptions are made, understanding the properties of ...
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Macroeconomics increasingly uses stochastic dynamic general equilibrium models to understand theoretical and policy issues. Unless very strong assumptions are made, understanding the properties of particular models requires solving the model using a computer. This volume brings together leading contributors in the field who explain in detail how to implement the computational techniques needed to solve dynamic economics models. It is based on lectures presented at the 7th Summer School of the European Economic Association on computational methods for the study of dynamic economies, held in 1996. A broad spread of techniques is covered, and their application to a wide range of subjects discussed. The book provides the basics of a tool kit that researchers and graduate students can use to solve and analyse their own theoretical models. It is oriented towards economists who already have the equivalent of a first year of graduate studies or to any advanced undergraduates or researchers with a solid mathematical background. No competence with writing computer codes is assumed. After an introduction by the editors, it is arranged in three parts: I Almost linear methods; II Nonlinear methods; and III Solving some dynamic economies.Less
Macroeconomics increasingly uses stochastic dynamic general equilibrium models to understand theoretical and policy issues. Unless very strong assumptions are made, understanding the properties of particular models requires solving the model using a computer. This volume brings together leading contributors in the field who explain in detail how to implement the computational techniques needed to solve dynamic economics models. It is based on lectures presented at the 7th Summer School of the European Economic Association on computational methods for the study of dynamic economies, held in 1996. A broad spread of techniques is covered, and their application to a wide range of subjects discussed. The book provides the basics of a tool kit that researchers and graduate students can use to solve and analyse their own theoretical models. It is oriented towards economists who already have the equivalent of a first year of graduate studies or to any advanced undergraduates or researchers with a solid mathematical background. No competence with writing computer codes is assumed. After an introduction by the editors, it is arranged in three parts: I Almost linear methods; II Nonlinear methods; and III Solving some dynamic economies.
Anthony Garratt, Kevin Lee, M. Hashem Pesaran, and Yongcheol Shin
- Published in print:
- 2006
- Published Online:
- September 2006
- ISBN:
- 9780199296859
- eISBN:
- 9780191603853
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/0199296855.003.0001
- Subject:
- Economics and Finance, Econometrics
This chapter introduces the long-run structural approach to modelling. It makes brief comparisons with the key alternative approaches, namely large-scale simultaneous equation models, unrestricted ...
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This chapter introduces the long-run structural approach to modelling. It makes brief comparisons with the key alternative approaches, namely large-scale simultaneous equation models, unrestricted and structural VARs, dynamic stochastic general equilibrium models, and New Keynesian models. The strengths of the long-run structural modelling approach are summarized and the organization of the book is described.Less
This chapter introduces the long-run structural approach to modelling. It makes brief comparisons with the key alternative approaches, namely large-scale simultaneous equation models, unrestricted and structural VARs, dynamic stochastic general equilibrium models, and New Keynesian models. The strengths of the long-run structural modelling approach are summarized and the organization of the book is described.
Subir K. Chakrabarti
- Published in print:
- 2011
- Published Online:
- September 2012
- ISBN:
- 9780198073970
- eISBN:
- 9780199081615
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/acprof:oso/9780198073970.003.0002
- Subject:
- Economics and Finance, Microeconomics
This chapter proves that there exists a sequence of equilibrium prices in a general equilibrium model in which markets meet successively over several periods. The general equilibrium model is that of ...
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This chapter proves that there exists a sequence of equilibrium prices in a general equilibrium model in which markets meet successively over several periods. The general equilibrium model is that of a pure exchange economy, whereby each consumer receives an endowment vector of the goods available in the economy at the beginning of each period. The endowment vectors are determined in a random manner in each period as a function of the endowment of the preceding period. Such an equilibrium sequence of prices is known as a Markovian equilibrium. This chapter also analyses the existence of equilibria in which the households use such Markov decision rules to determine the amount of consumption and the purchase of capital assets in each period. Finally, it examines the efficiency and welfare properties of these equilibria.Less
This chapter proves that there exists a sequence of equilibrium prices in a general equilibrium model in which markets meet successively over several periods. The general equilibrium model is that of a pure exchange economy, whereby each consumer receives an endowment vector of the goods available in the economy at the beginning of each period. The endowment vectors are determined in a random manner in each period as a function of the endowment of the preceding period. Such an equilibrium sequence of prices is known as a Markovian equilibrium. This chapter also analyses the existence of equilibria in which the households use such Markov decision rules to determine the amount of consumption and the purchase of capital assets in each period. Finally, it examines the efficiency and welfare properties of these equilibria.
Ayşe İmrohoroğlu, Selahattin İmrohoroğlu, and Douglas H. Joines
- Published in print:
- 2001
- Published Online:
- November 2003
- ISBN:
- 9780199248278
- eISBN:
- 9780191596605
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/0199248273.003.0010
- Subject:
- Economics and Finance, Macro- and Monetary Economics
A core topic of current economic research (and policy debate) is the evaluation of social security systems and their possible reforms. Shows how models of social security can be computed in economies ...
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A core topic of current economic research (and policy debate) is the evaluation of social security systems and their possible reforms. Shows how models of social security can be computed in economies where agents have uncertain lifespans and earnings profiles. In particular, it shows how to solve stationary equilibria and (within a linear quadratic formulation) how to solve transitional equilibria, such as the transition following a reform of the system. The two main sections of the chapter present: a model of social security with heterogeneous agents, which is related to several recent large‐scale general equilibrium, overlapping generations models; and a linear quadratic model of social security. These are both versions of an overlapping generations model with incomplete markets, and both assume that private annuity markets are missing, but they differ in their preference structures and certain other respects.Less
A core topic of current economic research (and policy debate) is the evaluation of social security systems and their possible reforms. Shows how models of social security can be computed in economies where agents have uncertain lifespans and earnings profiles. In particular, it shows how to solve stationary equilibria and (within a linear quadratic formulation) how to solve transitional equilibria, such as the transition following a reform of the system. The two main sections of the chapter present: a model of social security with heterogeneous agents, which is related to several recent large‐scale general equilibrium, overlapping generations models; and a linear quadratic model of social security. These are both versions of an overlapping generations model with incomplete markets, and both assume that private annuity markets are missing, but they differ in their preference structures and certain other respects.
Alasdair Smith
- Published in print:
- 1999
- Published Online:
- August 2004
- ISBN:
- 9780198293606
- eISBN:
- 9780191601262
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/0198293607.003.0006
- Subject:
- Economics and Finance, Macro- and Monetary Economics
A computable general equilibrium (CGE) model is developed to examine the impact of international trade on the labour market. The model confirms the general conclusion that the effects of trade on ...
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A computable general equilibrium (CGE) model is developed to examine the impact of international trade on the labour market. The model confirms the general conclusion that the effects of trade on labour demand or relative wages are small. It is argued that the ‘mainstream’ empirical trade model, of which the CGE model is one version, is unsuitable for providing accurate estimates of the labour market effects of trade, because its structure does not provide an appropriate model of either the skill endowments of the economy or the skill intensity of production.Less
A computable general equilibrium (CGE) model is developed to examine the impact of international trade on the labour market. The model confirms the general conclusion that the effects of trade on labour demand or relative wages are small. It is argued that the ‘mainstream’ empirical trade model, of which the CGE model is one version, is unsuitable for providing accurate estimates of the labour market effects of trade, because its structure does not provide an appropriate model of either the skill endowments of the economy or the skill intensity of production.
James R. Markusen
- Published in print:
- 2001
- Published Online:
- November 2003
- ISBN:
- 9780199241828
- eISBN:
- 9780191596834
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/0199241821.003.0003
- Subject:
- Economics and Finance, International
The aim of this chapter is to acquaint researchers in the field of international business with recent research in the field of international trade, which is beginning to incorporate aspects of ...
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The aim of this chapter is to acquaint researchers in the field of international business with recent research in the field of international trade, which is beginning to incorporate aspects of international business and multinational firms into the general‐equilibrium trade models that are the tools of analysis of international trade. The typical endogenous variables in general‐equilibrium trade models are described, and a simple knowledge‐capital model of the multinational enterprise (MNE) is presented. This model offers testable hypotheses about the relationship between the pattern of multinational investment and country characteristics. Some empirical results are presented from the model, which incorporate these hypotheses. The results indicate that the model should be useful for policy analysis and positive analysis of MNEs.Less
The aim of this chapter is to acquaint researchers in the field of international business with recent research in the field of international trade, which is beginning to incorporate aspects of international business and multinational firms into the general‐equilibrium trade models that are the tools of analysis of international trade. The typical endogenous variables in general‐equilibrium trade models are described, and a simple knowledge‐capital model of the multinational enterprise (MNE) is presented. This model offers testable hypotheses about the relationship between the pattern of multinational investment and country characteristics. Some empirical results are presented from the model, which incorporate these hypotheses. The results indicate that the model should be useful for policy analysis and positive analysis of MNEs.
Michio Morishima
- Published in print:
- 1969
- Published Online:
- November 2003
- ISBN:
- 9780198281641
- eISBN:
- 9780191596667
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/0198281641.003.0001
- Subject:
- Economics and Finance, Development, Growth, and Environmental
Introduces multi‐sectoral growth analysis. Mainly devoted to examining a Walrasian general equilibrium model of capital formation on the smallest possible scale. It is assumed that the economy ...
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Introduces multi‐sectoral growth analysis. Mainly devoted to examining a Walrasian general equilibrium model of capital formation on the smallest possible scale. It is assumed that the economy concerned consists of many firms that are classified into two industries: the consumption‐good industry and the capital‐good industry. It is also assumed (as Walras and Leontief assumed) that there is no possibility of joint production: the consumption‐good industry only produces the consumption goods and the capital‐good industry only the capital goods (later in the book this assumption is shown to be undesirable). The remaining parts of the chapter give further mathematical treatment of the existence of short‐run equilibrium, its uniqueness, its Pareto optimality, and the investment function implied—a neoclassical growth.Less
Introduces multi‐sectoral growth analysis. Mainly devoted to examining a Walrasian general equilibrium model of capital formation on the smallest possible scale. It is assumed that the economy concerned consists of many firms that are classified into two industries: the consumption‐good industry and the capital‐good industry. It is also assumed (as Walras and Leontief assumed) that there is no possibility of joint production: the consumption‐good industry only produces the consumption goods and the capital‐good industry only the capital goods (later in the book this assumption is shown to be undesirable). The remaining parts of the chapter give further mathematical treatment of the existence of short‐run equilibrium, its uniqueness, its Pareto optimality, and the investment function implied—a neoclassical growth.
Sugata Marjit and Saibal Kar
- Published in print:
- 2011
- Published Online:
- September 2012
- ISBN:
- 9780198071495
- eISBN:
- 9780199081257
- Item type:
- book
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/acprof:oso/9780198071495.001.0001
- Subject:
- Economics and Finance, Development, Growth, and Environmental
The informal economy has emerged as one of the most dynamic, active, and hotly-debated domains in the entire developing world. Unfortunately, it remains one of the least treated subjects in ...
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The informal economy has emerged as one of the most dynamic, active, and hotly-debated domains in the entire developing world. Unfortunately, it remains one of the least treated subjects in mainstream economic theory and development economics. This book provides a detailed theoretical overview and analytical understanding of informal labour markets in the context of economic reforms. Grounded in the neo-classical general equilibrium framework, it analyses the impact of deregulatory policies on the welfare of informal workers in a segmented labour market. Using empirical data and case studies, the book discusses how informal wage responds to unemployment in the formal sector by exploring the interactions between the formal and the informal labour markets. The book also examines institutional factors—political, economic, and governance mechanisms—to explore the major causes that sustain or impede the dynamism of the informal labour markets.Less
The informal economy has emerged as one of the most dynamic, active, and hotly-debated domains in the entire developing world. Unfortunately, it remains one of the least treated subjects in mainstream economic theory and development economics. This book provides a detailed theoretical overview and analytical understanding of informal labour markets in the context of economic reforms. Grounded in the neo-classical general equilibrium framework, it analyses the impact of deregulatory policies on the welfare of informal workers in a segmented labour market. Using empirical data and case studies, the book discusses how informal wage responds to unemployment in the formal sector by exploring the interactions between the formal and the informal labour markets. The book also examines institutional factors—political, economic, and governance mechanisms—to explore the major causes that sustain or impede the dynamism of the informal labour markets.
Michio Morishima
- Published in print:
- 1969
- Published Online:
- November 2003
- ISBN:
- 9780198281641
- eISBN:
- 9780191596667
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/0198281641.003.0005
- Subject:
- Economics and Finance, Development, Growth, and Environmental
Returns to the neoclassical model where the full employment of resources and labour is automatically attained and the Rule of Profitability and the Rule of Free Goods control behaviour of activities ...
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Returns to the neoclassical model where the full employment of resources and labour is automatically attained and the Rule of Profitability and the Rule of Free Goods control behaviour of activities and prices. The previous two‐good model (consumption and capital good) is complicated to include many kinds of commodities, and it is found that the neoclassical analysis of stability of long‐run equilibrium is not necessarily the same. The stability criterion may be different from model to model if the capital‐good industry is divided into many sectors, although it is shown that it is still valid in models with many consumption goods and one capital good. This means the two‐sector model is inadequate to explain the actual process of capital accumulation, so an approach with merits over the Walrasian‐type analysis is offered, which starts on the road to more disaggregated general equilibrium models. The different sections of the chapter discuss the case of many consumption goods, the finding that that heterogeneity of consumption goods does not affect the stability criterion, the finding that many capital goods may lead to the possibility of ‘stability–instability’, the generalized Leontief model, the shift in the saving function from the ‘uniclass’ to the Cambridge type (the Golden Equilibrium), and the dual stability–instability theorem.Less
Returns to the neoclassical model where the full employment of resources and labour is automatically attained and the Rule of Profitability and the Rule of Free Goods control behaviour of activities and prices. The previous two‐good model (consumption and capital good) is complicated to include many kinds of commodities, and it is found that the neoclassical analysis of stability of long‐run equilibrium is not necessarily the same. The stability criterion may be different from model to model if the capital‐good industry is divided into many sectors, although it is shown that it is still valid in models with many consumption goods and one capital good. This means the two‐sector model is inadequate to explain the actual process of capital accumulation, so an approach with merits over the Walrasian‐type analysis is offered, which starts on the road to more disaggregated general equilibrium models. The different sections of the chapter discuss the case of many consumption goods, the finding that that heterogeneity of consumption goods does not affect the stability criterion, the finding that many capital goods may lead to the possibility of ‘stability–instability’, the generalized Leontief model, the shift in the saving function from the ‘uniclass’ to the Cambridge type (the Golden Equilibrium), and the dual stability–instability theorem.
Lawrence A. Boland
- Published in print:
- 2017
- Published Online:
- May 2017
- ISBN:
- 9780190274320
- eISBN:
- 9780190274368
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/acprof:oso/9780190274320.003.0011
- Subject:
- Economics and Finance, Macro- and Monetary Economics
This chapter will critically examine today’s common ways to build equilibrium models. These specifically include Dynamic-Stochastic General Equilibrium models, game theoretical models and empirical ...
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This chapter will critically examine today’s common ways to build equilibrium models. These specifically include Dynamic-Stochastic General Equilibrium models, game theoretical models and empirical GE models. Each of these types of equilibrium model try to address the issues of how a model’s decision makers get the information needed to guarantee the attainment of a state of equilibrium. The chapter addresses the alleged limits of general equilibrium models (particularly the issues of dynamics, time and expectations), the current attempts to overcome the limits of general equilibrium models, and three empirical alternatives to Walrasian general equilibrium models. These alternatives include the Computable General Equilibrium models and the Applied General Equilibrium models. The third model involves building econometric models only after evaluating the statistical properties of the data before using them in the model.Less
This chapter will critically examine today’s common ways to build equilibrium models. These specifically include Dynamic-Stochastic General Equilibrium models, game theoretical models and empirical GE models. Each of these types of equilibrium model try to address the issues of how a model’s decision makers get the information needed to guarantee the attainment of a state of equilibrium. The chapter addresses the alleged limits of general equilibrium models (particularly the issues of dynamics, time and expectations), the current attempts to overcome the limits of general equilibrium models, and three empirical alternatives to Walrasian general equilibrium models. These alternatives include the Computable General Equilibrium models and the Applied General Equilibrium models. The third model involves building econometric models only after evaluating the statistical properties of the data before using them in the model.
Yves Balasko
- Published in print:
- 2009
- Published Online:
- August 2013
- ISBN:
- 9780262026543
- eISBN:
- 9780262255370
- Item type:
- book
- Publisher:
- The MIT Press
- DOI:
- 10.7551/mitpress/9780262026543.001.0001
- Subject:
- Economics and Finance, Econometrics
This book argues that, contrary to what many textbooks want readers to believe, the study of the general equilibrium model did not end with the existence and welfare theorems of the 1950s. These ...
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This book argues that, contrary to what many textbooks want readers to believe, the study of the general equilibrium model did not end with the existence and welfare theorems of the 1950s. These developments, which characterize the modern phase of the theory of general equilibrium, led to what this book calls the postmodern phase, marked by the reintroduction of differentiability assumptions and the application of the methods of differential topology to the study of the equilibrium equation. This study demonstrates the central role played by the equilibrium manifold in understanding the properties of the Arrow–Debreu model and its extensions. It argues that the tools of differential topology articulated around the concept of equilibrium manifold offer powerful methods for studying economically important issues, from existence and uniqueness to business cycles and economic fluctuations. After an examination of the theory of general equilibrium’s evolution in the hundred years between Walras and Arrow–Debreu, the book discusses the properties of the equilibrium manifold and the natural projection. It highlights the important role of the set of no-trade equilibria, the structure of which is applied to the global structure of the equilibrium manifold. The book also develops a geometric approach to the study of the equilibrium manifold. Applications include stability issues of adjustment dynamics for out-of-equilibrium prices, the introduction of price-dependent preferences, and aspects of time and uncertainty in extensions of the general equilibrium model that account for various forms of market frictions and imperfections.Less
This book argues that, contrary to what many textbooks want readers to believe, the study of the general equilibrium model did not end with the existence and welfare theorems of the 1950s. These developments, which characterize the modern phase of the theory of general equilibrium, led to what this book calls the postmodern phase, marked by the reintroduction of differentiability assumptions and the application of the methods of differential topology to the study of the equilibrium equation. This study demonstrates the central role played by the equilibrium manifold in understanding the properties of the Arrow–Debreu model and its extensions. It argues that the tools of differential topology articulated around the concept of equilibrium manifold offer powerful methods for studying economically important issues, from existence and uniqueness to business cycles and economic fluctuations. After an examination of the theory of general equilibrium’s evolution in the hundred years between Walras and Arrow–Debreu, the book discusses the properties of the equilibrium manifold and the natural projection. It highlights the important role of the set of no-trade equilibria, the structure of which is applied to the global structure of the equilibrium manifold. The book also develops a geometric approach to the study of the equilibrium manifold. Applications include stability issues of adjustment dynamics for out-of-equilibrium prices, the introduction of price-dependent preferences, and aspects of time and uncertainty in extensions of the general equilibrium model that account for various forms of market frictions and imperfections.
Yves Balasko
- Published in print:
- 2011
- Published Online:
- October 2017
- ISBN:
- 9780691146799
- eISBN:
- 9781400838912
- Item type:
- chapter
- Publisher:
- Princeton University Press
- DOI:
- 10.23943/princeton/9780691146799.003.0012
- Subject:
- Economics and Finance, History of Economic Thought
This chapter analyzes an equilibrium model where privately owned firms feature either smooth decreasing or constant returns to scale. Profit of the constant returns to scale firms being equal to zero ...
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This chapter analyzes an equilibrium model where privately owned firms feature either smooth decreasing or constant returns to scale. Profit of the constant returns to scale firms being equal to zero at equilibrium, the equilibrium of the model does not depend on the ownership structure of these firms. In addition, the convex conical production sets of these firms sum up into a convex cone. It is as if the production sector operating under constant returns consists of a unique firm. The general equilibrium model with decreasing and constant returns to scale firms is essentially the same model as the one considered in Chapter 10 with the addition of a unique firm operating under constant returns to scale. Nevertheless, this addition is enough to hamstring the approach of the preceding chapters based on the concept of price system that equates aggregate supply and demand. The solution is to add to that price system the activity of the constant returns to scale firm.Less
This chapter analyzes an equilibrium model where privately owned firms feature either smooth decreasing or constant returns to scale. Profit of the constant returns to scale firms being equal to zero at equilibrium, the equilibrium of the model does not depend on the ownership structure of these firms. In addition, the convex conical production sets of these firms sum up into a convex cone. It is as if the production sector operating under constant returns consists of a unique firm. The general equilibrium model with decreasing and constant returns to scale firms is essentially the same model as the one considered in Chapter 10 with the addition of a unique firm operating under constant returns to scale. Nevertheless, this addition is enough to hamstring the approach of the preceding chapters based on the concept of price system that equates aggregate supply and demand. The solution is to add to that price system the activity of the constant returns to scale firm.
Yves Balasko
- Published in print:
- 2011
- Published Online:
- October 2017
- ISBN:
- 9780691146799
- eISBN:
- 9781400838912
- Item type:
- chapter
- Publisher:
- Princeton University Press
- DOI:
- 10.23943/princeton/9780691146799.003.0013
- Subject:
- Economics and Finance, History of Economic Thought
This chapter begins with a brief discussion of the topicality of the standard model. The general equilibrium model studied in this book, a model that we can call the standard model, offers us a ...
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This chapter begins with a brief discussion of the topicality of the standard model. The general equilibrium model studied in this book, a model that we can call the standard model, offers us a description of modern economies with their competitive markets and firms that is sufficiently general to be economically relevant without being too complex to make its study intractable. Many simpler models exist, but their relevance is doubtful at best because those models are too simplistic. The chapter then discusses other ways to extract information from an equation system and the application of the standard model to second-generation general equilibrium models.Less
This chapter begins with a brief discussion of the topicality of the standard model. The general equilibrium model studied in this book, a model that we can call the standard model, offers us a description of modern economies with their competitive markets and firms that is sufficiently general to be economically relevant without being too complex to make its study intractable. Many simpler models exist, but their relevance is doubtful at best because those models are too simplistic. The chapter then discusses other ways to extract information from an equation system and the application of the standard model to second-generation general equilibrium models.
Sugata Marjit and Saibal Kar
- Published in print:
- 2011
- Published Online:
- September 2012
- ISBN:
- 9780198071495
- eISBN:
- 9780199081257
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/acprof:oso/9780198071495.003.0005
- Subject:
- Economics and Finance, Development, Growth, and Environmental
This chapter presents a general equilibrium model to theoretically examine the activities of the informal sector in dual economy labour markets. By linking the unorganized sector to the organized ...
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This chapter presents a general equilibrium model to theoretically examine the activities of the informal sector in dual economy labour markets. By linking the unorganized sector to the organized sector through aspects of capital mobility and labour productivity, it estimates and theorizes in more formal ways the effects of reforms on the wages and employment status of workers in the informal sector. It establishes via rigorous general equilibrium models that trade liberalization in the formal sector can raise both employment and wages in the informal sector if capital is easily mobile between the two sectors. Even if capital is sticky, downsizing of the capital-intensive import-competing sector may lead to increased output in the labour-intensive informal segment and an increase in informal wages. The issue of capital mobility thus takes on an important role in shaping the magnitude and directionality of informal wages subject to exogenous policy changes in the organized sectors of an economy.Less
This chapter presents a general equilibrium model to theoretically examine the activities of the informal sector in dual economy labour markets. By linking the unorganized sector to the organized sector through aspects of capital mobility and labour productivity, it estimates and theorizes in more formal ways the effects of reforms on the wages and employment status of workers in the informal sector. It establishes via rigorous general equilibrium models that trade liberalization in the formal sector can raise both employment and wages in the informal sector if capital is easily mobile between the two sectors. Even if capital is sticky, downsizing of the capital-intensive import-competing sector may lead to increased output in the labour-intensive informal segment and an increase in informal wages. The issue of capital mobility thus takes on an important role in shaping the magnitude and directionality of informal wages subject to exogenous policy changes in the organized sectors of an economy.
Craig Burnside
- Published in print:
- 2001
- Published Online:
- November 2003
- ISBN:
- 9780199248278
- eISBN:
- 9780191596605
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/0199248273.003.0005
- Subject:
- Economics and Finance, Macro- and Monetary Economics
A number of numerical methods are discussed for solving dynamic stochastic general equilibrium models that fall within the common category of discrete state‐space methods. These methods can be ...
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A number of numerical methods are discussed for solving dynamic stochastic general equilibrium models that fall within the common category of discrete state‐space methods. These methods can be applied in situations where the state space of the model in question is given by a finite set of discrete points; in these cases the methods provide an ‘exact’ solution to the model in question. However they are frequently applied in situations where the model's state space is continuous in which case the discrete state space can be viewed as an approximation to the continuous state space. Discrete state‐space methods are discussed in the context of two well‐known examples: a simple one‐asset version of Lucas's (1978) consumption‐based asset pricing model and the one‐sector neoclassical growth model. The discussion does not aim to exhaust the list of possible discrete state‐space methods as they are very numerous; rather it describes several examples that illustrate the basic principles involved. The main sections of the chapter describe the basic principles of numerical quadrature underlying most discrete state‐space methods, show how they can be applied in a very straightforward way to problems in which the state space consists entirely of exogenous state variables, and describe methods that can be used when there are endogenous state variables. The last section notes the several files associated with the chapter for use with MATLAB.Less
A number of numerical methods are discussed for solving dynamic stochastic general equilibrium models that fall within the common category of discrete state‐space methods. These methods can be applied in situations where the state space of the model in question is given by a finite set of discrete points; in these cases the methods provide an ‘exact’ solution to the model in question. However they are frequently applied in situations where the model's state space is continuous in which case the discrete state space can be viewed as an approximation to the continuous state space. Discrete state‐space methods are discussed in the context of two well‐known examples: a simple one‐asset version of Lucas's (1978) consumption‐based asset pricing model and the one‐sector neoclassical growth model. The discussion does not aim to exhaust the list of possible discrete state‐space methods as they are very numerous; rather it describes several examples that illustrate the basic principles involved. The main sections of the chapter describe the basic principles of numerical quadrature underlying most discrete state‐space methods, show how they can be applied in a very straightforward way to problems in which the state space consists entirely of exogenous state variables, and describe methods that can be used when there are endogenous state variables. The last section notes the several files associated with the chapter for use with MATLAB.
Rob Davies and Jørn Rattsø
- Published in print:
- 2001
- Published Online:
- September 2007
- ISBN:
- 9780195145465
- eISBN:
- 9780199783960
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/acprof:oso/9780195145465.003.0011
- Subject:
- Economics and Finance, International
The liberalization process in Zimbabwe is described in the first main section of this chapter, and the next section offers a stylized theory of trade liberalization effects in Africa based on the ...
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The liberalization process in Zimbabwe is described in the first main section of this chapter, and the next section offers a stylized theory of trade liberalization effects in Africa based on the Ricardo–Viner model. An expansion of the theory model is then implemented as a CGE (computable general equilibrium) model for Zimbabwe, and the deindustrialization effects of trade liberalization are calibrated in the next section. The macroanalysis is begun by decomposing aggregate demand to identify changes in the short‐run adjustment mechanisms of the economy. The next section provides an econometric analysis of the role of wages in the macroeconomy – the estimation includes the wage formation process described by the wage curve and the consequences of real wage changes for aggregate demand. In the last main section, disaggregated labor market data are applied to documented changes in distribution and productivity.Less
The liberalization process in Zimbabwe is described in the first main section of this chapter, and the next section offers a stylized theory of trade liberalization effects in Africa based on the Ricardo–Viner model. An expansion of the theory model is then implemented as a CGE (computable general equilibrium) model for Zimbabwe, and the deindustrialization effects of trade liberalization are calibrated in the next section. The macroanalysis is begun by decomposing aggregate demand to identify changes in the short‐run adjustment mechanisms of the economy. The next section provides an econometric analysis of the role of wages in the macroeconomy – the estimation includes the wage formation process described by the wage curve and the consequences of real wage changes for aggregate demand. In the last main section, disaggregated labor market data are applied to documented changes in distribution and productivity.
John W. Diamond, George R. Zodrow, Thomas S. Neubig, and Robert J. Carroll
- Published in print:
- 2014
- Published Online:
- September 2015
- ISBN:
- 9780262028301
- eISBN:
- 9780262321914
- Item type:
- chapter
- Publisher:
- The MIT Press
- DOI:
- 10.7551/mitpress/9780262028301.003.0008
- Subject:
- Economics and Finance, Financial Economics
The U.S. statutory corporate income tax rate is now the highest in the world among industrialized countries, and has sparked many proposals for reform. In this chapter, John Diamond, George Zodrow, ...
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The U.S. statutory corporate income tax rate is now the highest in the world among industrialized countries, and has sparked many proposals for reform. In this chapter, John Diamond, George Zodrow, Thomas Neubig, and Robert Carroll use a dynamic, overlapping generations, computable general equilibrium model that includes an imperfectly competitive sector that earns above-normal returns, international capital flows, and income shifting to simulate the macroeconomic effects of various reforms of the corporate income tax. They consider base-broadening, rate-reducing reforms that are financed through (1) the elimination of a wide range of business tax expenditures, (2) a wage tax increase, and (3) a reduction in government spending. Their model simulation results suggest that reforms that finance rate reduction with the elimination of all business tax expenditures may reduce investment and GDP, while alternative reforms that retain many investment incentives or finance rate reduction with wage tax increases or cuts in government transfers are more likely to result in long run increases in investment and GDP.Less
The U.S. statutory corporate income tax rate is now the highest in the world among industrialized countries, and has sparked many proposals for reform. In this chapter, John Diamond, George Zodrow, Thomas Neubig, and Robert Carroll use a dynamic, overlapping generations, computable general equilibrium model that includes an imperfectly competitive sector that earns above-normal returns, international capital flows, and income shifting to simulate the macroeconomic effects of various reforms of the corporate income tax. They consider base-broadening, rate-reducing reforms that are financed through (1) the elimination of a wide range of business tax expenditures, (2) a wage tax increase, and (3) a reduction in government spending. Their model simulation results suggest that reforms that finance rate reduction with the elimination of all business tax expenditures may reduce investment and GDP, while alternative reforms that retain many investment incentives or finance rate reduction with wage tax increases or cuts in government transfers are more likely to result in long run increases in investment and GDP.
Yves Balasko
- Published in print:
- 2011
- Published Online:
- October 2017
- ISBN:
- 9780691146799
- eISBN:
- 9781400838912
- Item type:
- chapter
- Publisher:
- Princeton University Press
- DOI:
- 10.23943/princeton/9780691146799.003.0004
- Subject:
- Economics and Finance, History of Economic Thought
The exchange model is the simplest of all general equilibrium models. Studying it will show us the directions to follow when studying more complex models like those that include production or take ...
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The exchange model is the simplest of all general equilibrium models. Studying it will show us the directions to follow when studying more complex models like those that include production or take explicitly into account time and uncertainty. This chapter introduces the exchange model defined by the equilibrium manifold and the natural projection. It presents proof that the equilibrium manifold is indeed a smooth manifold. The smooth manifold structure implies that the natural projection is a smooth map. In terms of comparative statics, this tells us that equilibrium prices can be considered as depending linearly on the fundamentals defining an economy in sufficiently small neighborhoods of regular equilibria.Less
The exchange model is the simplest of all general equilibrium models. Studying it will show us the directions to follow when studying more complex models like those that include production or take explicitly into account time and uncertainty. This chapter introduces the exchange model defined by the equilibrium manifold and the natural projection. It presents proof that the equilibrium manifold is indeed a smooth manifold. The smooth manifold structure implies that the natural projection is a smooth map. In terms of comparative statics, this tells us that equilibrium prices can be considered as depending linearly on the fundamentals defining an economy in sufficiently small neighborhoods of regular equilibria.
Richard Pomfret
- Published in print:
- 2001
- Published Online:
- November 2003
- ISBN:
- 9780199248872
- eISBN:
- 9780191596797
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/0199248877.003.0016
- Subject:
- Economics and Finance, International
Section 1 of this chapter investigates whether RTAs have led to increased regionalization of world trade. Section 2 reports on studies using CGE models to identify gainers and losers from the spread ...
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Section 1 of this chapter investigates whether RTAs have led to increased regionalization of world trade. Section 2 reports on studies using CGE models to identify gainers and losers from the spread of RTAs as opposed to non‐discriminatory trade liberalization. Section 3 draws conclusions, emphasizing that the problem for all empirical work on RTAs is our poor knowledge of elasticities of substitution between imports from different sources.Less
Section 1 of this chapter investigates whether RTAs have led to increased regionalization of world trade. Section 2 reports on studies using CGE models to identify gainers and losers from the spread of RTAs as opposed to non‐discriminatory trade liberalization. Section 3 draws conclusions, emphasizing that the problem for all empirical work on RTAs is our poor knowledge of elasticities of substitution between imports from different sources.
Yves Balasko
- Published in print:
- 2011
- Published Online:
- October 2017
- ISBN:
- 9780691146799
- eISBN:
- 9781400838912
- Item type:
- chapter
- Publisher:
- Princeton University Press
- DOI:
- 10.23943/princeton/9780691146799.003.0010
- Subject:
- Economics and Finance, History of Economic Thought
This chapter discusses an approach to the study of the general equilibrium model with private ownership of smooth production with decreasing returns by adjusting consumers’ individual demand ...
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This chapter discusses an approach to the study of the general equilibrium model with private ownership of smooth production with decreasing returns by adjusting consumers’ individual demand functions for production. The “exchange model” defined by these production adjusted demand functions is then shown to be equivalent to the original general equilibrium model with private ownership of production. The production adjusted demand functions are very close to satisfy the properties considered in the first part of this book, properties that guarantee that the main properties of the exchange model are satisfied. As a result, the general equilibrium model with private ownership of smooth production with decreasing returns features exactly the same properties as the standard smooth exchange model.Less
This chapter discusses an approach to the study of the general equilibrium model with private ownership of smooth production with decreasing returns by adjusting consumers’ individual demand functions for production. The “exchange model” defined by these production adjusted demand functions is then shown to be equivalent to the original general equilibrium model with private ownership of production. The production adjusted demand functions are very close to satisfy the properties considered in the first part of this book, properties that guarantee that the main properties of the exchange model are satisfied. As a result, the general equilibrium model with private ownership of smooth production with decreasing returns features exactly the same properties as the standard smooth exchange model.
