1. General Course Objectives. 2. Organisation

Transcription

1 SPECIAL TOPICS: APPLIED GENERAL EQUILIBRIUM MODELLING WITH APPLICATIONS TO INTERNATIONAL TRADE AND ENVIRONMENTAL POLICIES ECO 6904 B/ ECO 4199 B YAZID DISSOU WINTER 2009 Course schedule: Mondays: 2:30 to 5:30 p.m. Course location: DMS Office: Office hours: Wednesdays 10:00-12:00 Telephone: (ext. 1686) ydissou@uottawa.ca 1. General Course Objectives The course will focus on the use of a quantitative tool for policy analysis from an economywide perspective. Students will be introduced to applied general equilibrium (AGE) modelling that has now become an active field of applied economics, which endeavours to study both the allocative and distributional effects of economic policies and economic shocks. During the course, students will be exposed to in-depth applications of this modelling tool to analyse economic policies through practical exercises. They will have opportunities to build and use AGE models to evaluate policy initiatives. After a brief review of the theoretical underpinning of general equilibrium models, the course will review in details the practical steps required to build an AGE model for policy analysis. A particular emphasis will be put on the understanding and the economic interpretation of the results. 2. Organisation The course will use a practical, very intensive, and sequential approach to model building. Each element will be built on what was seen before; class attendance is thus highly recommended. Students will have opportunity to master materials covered in class and deepen their knowledge through homework assignments. 3. Specific Objectives Students will be exposed to a conceptual framework useful for examining economic issues from an economy-wide perspective. Students will understand the economic logic behind general equilibrium models. Student will learn the basic steps required to build a CGE model. Students will learn how to run simulations on trade and environmental policies using large-scale CGE models and learn how to interpret the results. 5. Evaluation The course will be graded on a series of three homework assignments (15% each) Applied General Equilibrium Modelling (ECO 6904 B/ ECO 4199 B) Page 1 of 5

2 6. Outline an in-class presentation along with a page paper (without tables and references) to be handed in the last day of classes: (25%) and one classroom final exam (30%). I. Introduction to CGEs A. Importance and Usefulness of CGE models 1. Partial vs. General Equilibrium Analysis 2. The Circular Flow of Income and Goods in the Economy 3. Usefulness of CGE models B. Theoretical Foundations of GE Models 1. Existence and Uniqueness of a Competitive Equilibrium 2. Welfare Properties of a Competitive Equilibrium C. A Small Example of GE Model: 2x2x1 Model Readings: 4, 11, 16 an 23 II. Introduction to a Computational Software for CGE Modelling: the Generalized Algebraic Modelling Software (GAMS) A. GAMS Syntax B. Solving the 2x2x1 Model with GAMS C. Playing with the 2x2x1 Model: Numéraire, Endowments and Technology Parameters D. Introduction to the Principles of Calibration Reading: 1,3 and 8 Note: The student version of GAMS is available at III. Mathematical Optimization and Functional Forms A. Refresher in Mathematical Optimization B. Frequently Used Functional Forms in CGE models Reading: 7 IV. I-O Tables and SAMs A. Introduction to I-O Tables B. Introduction to SAMs Readings: 19, 21 and 22 V. Developing a Basic Static Multi-Sector General Equilibrium Model with Perfect Competition A. A Closed Economy Model without Taxes 1. Model Specification 2. Construction of the SAM 3. Numerical Implementation of the Model B. A Closed Economy Model with Taxes C. A Small-Open Economy with Taxes D. Quick Overview on Closure Rules and on their Importance in CGE Models Applied General Equilibrium Modelling (ECO 6904 B/ ECO 4199 B) Page 2 of 5

3 Readings: 15 and 18 VI. Trade Policy Analysis with a Large-Scale CGE Model: An Example Readings: 2, 6, 12 and 13 VII. Environmental Policy Analysis with a Large-Scale CGE Model: An Example Readings: 5 and 20 VIII. Extensions: Other Types of CGE Models A. Multi-Country CGE Models B. Introducing Dynamics in CGE Models: The Simplest Dynamic General Equilibrium Model C. CGE Models with Imperfection Competition D. Introducing Rigidities in the Labour Market 7. Reading list Readings: 2, 5, 6, 9, 10, and Brooke, A. and al. GAMS: A User s Guide (1998), GAMS Development Corporation, Washington D.C., USA 2. Decaluwé, B., Y. Dissou and Veronique Robichaud (2004) Regionalism and Labour Market Adjustment in UEMOA Countries, Journal of African Economies, vol. 13, no 2, Dellink, R., J. Szõnyi, and H. Bartelings (2002) GAMS for Environmental_Economic Modelling, Environmental Economics and Natural Resources Group, Wageningen University, Wageningen, Netherlands. 4. Devarajan, S. and Robinson, S. (2002) The Influence of Computable General Equilibrium Models on Policy, Trade and Macroeconomic Division, International Food Policy Research Institute, Washington. 5. Dissou, Y. (2006) Efficiency and Sectoral Distributional Impacts of Output-Based Emissions Allowances, Contributions to Economic Analysis & Policy: Vol. 5: No. 1, Article Dissou, Y. (2002) Dynamic Effects in Senegal of Regional Trading Agreement among UEMOA Countries, The Review of International Economics, vol. 10, 1, February Dissou, Y. (1993) On some Functional Forms Used in CGE Models, Mimeo 8. Dumont, J.C. and V. Robichaud (1999) Introduction to GAMS Software: A Manual for CGE Modellers, Mimeo. 9. Fougère M. and M. Mérette (1999), Population Ageing and Economic Growth in Seven OECD Countries, Economic Modelling, 16, Francois, J. F. and D. W. Roland-Holst (1997) Trade Policies, Scale Economies and Imperfect Competition in Applied Methods for Trade Policy Analysis: A Handbook, 1997, pp , Cambridge: Cambridge University Press. 11. Ginsburgh, Victor and Michael Keyzer (2002) The Structure of Applied General Equilibrium Models, MIT Press, Massachusetts: Cambridge, Chapters 1 and Harrison, G. W., T. F. Rutherford and D. G. Tarr (2003) Trade liberalization, Poverty and Efficient Equity, Journal of Development Economics, June 2003, vol. 71 issue 1, pp Keuschnigg, C and W. Kohler (2002) Eastern Enlargement of the EU: How Much Is It Worth for Austria?, Review of International Economics, May 2002, vol. 10, issue 2, pp Applied General Equilibrium Modelling (ECO 6904 B/ ECO 4199 B) Page 3 of 5

4 14. Maechler, A. and D. W. Roland-Host (1997) Empirical Specifications for a General Equilibrium Analysis of Labor Market Policies and Adjustments in Applied Methods for Trade Policy Analysis: A Handbook, 1997, pp , Cambridge: Cambridge University Press. 15. Mansur, A. and J. Whalley (1984) Numerical Specification of Applied General Equilibrium Models: Estimation, Calibration, and Data in Scarf and Shoven, Applying General Equilibrium Analysis, Cambridge University Press, New York, pp O'Rourke, K. (1995) Computable General Equilibrium Models and Economic History, Available on the Web at Reinert, K. A. and D. W. Roland-Holst (2002) North-South Trade and Occupational Wages: Some evidence from North America, Review of International Economics, vol. 6 issue 1, p Robison, S. and al (1999) From Stylised to Applied Models: Building Multi-sector CGE Models for Policy Analysis, North-American Journal of Economics and Finance, 10, pp Robinson, S., A. Cattaneo, and M. El-Said (2000) Updating and Estimating a Social Accounting Matrix Using Cross Entropy Methods. TMD Discussion Paper No. 58. Washington, D.C.: International Food Policy Research Institute. 20. Rose, A. and G. Oladosu (2002) Greenhouse Gas Reduction Policy in the United States: Identifying Winners and Losers in an Expanded Permit Trading System Energy Journal, v. 23, iss. 1, pp Round, Jeffery I, (2003), Constructing SAMs for Development Policy Analysis: Lessons Learned and Challenges Ahead, mimeo. 22. St-Hilaire, F. and J. Whalley (1983) "A Micro-consistent Equilibrium Data Set for Canada for Use in Tax Policy Analysis." The Review of Income and Wealth, vol. 29, pp Wing, I. S. (2004) CGE Models for Economy-Wide Policy Analysis: Everything You Ever Wanted to Know (But Were Afraid to Ask). 24. Fougère, M. J. Mercenier and M. Mérette (2007) A Sectoral and Occupational Analysis of Population Ageing in Canada Using a Dynamic CGE Overlapping Generations Model, Economic Modelling, 24, 4, pp Applied General Equilibrium Modelling (ECO 6904 B/ ECO 4199 B) Page 4 of 5

5 Absence from an examination or late submission of an assignment Absence from any examination or test, or late submission of assignments due to illness, must be justified; otherwise, a penalty will be imposed. The Faculty reserves the right to accept or reject the reason offered. Reasons such as travel, employment, and misreading the examination schedule are not usually accepted. Beware of Academic Fraud! Academic fraud is an act committed by a student to distort the marking of assignments, tests, examinations, and other forms of academic evaluation. Academic fraud is neither accepted nor tolerated by the University. Anyone found guilty of academic fraud is liable to severe academic sanctions. Here are a few examples of academic fraud: engaging in any form of plagiarism or cheating; presenting falsified research data; handing in an assignment that was not authored, in whole or in part, by the student; submitting the same assignment in more than one course, without the written consent of the professors concerned. In recent years, the development of the Internet has made it much easier to identify academic plagiarism. The tools available to your professors allow them to trace the exact origin of a text on the Web, using just a few words. In cases where students are unsure whether they are at fault, it is their responsibility to consult the University s Web site at the following address: «Tools for Writing Papers and Assignments». Persons who have committed or attempted to commit (or have been accomplices to) academic fraud will be penalized. Here are some examples of the academic sanctions, which can be imposed: a grade of «F» for the assignment or course in question; an additional program requirement of between 3 and 30 credits; suspension or expulsion from the Faculty. Last session, most of the students found guilty of fraud were given an «F» for the course and had between three and twelve credits added to their program requirement. For more information, refer to: Applied General Equilibrium Modelling (ECO 6904 B/ ECO 4199 B) Page 5 of 5