Elena Ianchovichina

Theoretical Structure of Dynamic GTAP

This paper documents the foreign asset ownership and investment theory of the dynamic GTAP Model (GTAP-Dyn). The new investment theory offers a disequilibrium approach to modeling endogenously international capital mobility. It permits a recursive solution procedure, a feature that allows easy implementation of dynamics into any static AGE model without imposing limitations on the models size. The method involves treating time as a variable, not as an index. having time as a variable allows the construction of dynamic GTAP with minimum modifications to the existing structure of GTAP, by separating the theory of static GTAP from the length of run.

Dynamic Modeling and Applications for Global Economic Analysis

The book presents applications that deal with important policy issues using an original global dynamic CGE framework. The applications can be grouped into two major areas – environmental and integration issues. The environmental issues, well suited for analysis with dynamic GTAP, range from CO2 emissions trading, to carbon policies such as reforestation programs and carbon subsidies, to technological progress in agriculture. The rest of the applications focus on integration issues and issues on which there are very few simulation studies such as behind the border measures (e.g. rules governing foreign investment, e-commerce regulations, trade in services, harmonization of technical standards, sanitary and phyto-sanitary regulations, the streamlining of customs procedures), demographic change and migration. Available for purchase at: Cambridge University Press Applications available at: www.gtap.agecon.purdue.edu/models/Dynamic/applications.asp

Dynamic Modeling and Applications for Global Economic Analysis: An Overview of the Dynamic GTAP Data Base: The Data Base Construction and Aggregation Programs

The GDyn Data Base, used with the Dynamic GTAP model, is based on the GTAP Data Base (Dimaranan, 2005), which describes the global economy in a given year (2001 for the GTAP 6 Data Base). The GTAP Data Base is augmented with additional data required for the Dynamic version of the GTAP model. This chapter covers the preparation of these additional elements of the GDyn Data Base, 1 and the manipulation and aggregation of the GDyn Data Base with various utility programs. The focus is on the additional data requirements, with minimal discussion of the dynamic parameters. Readers interested in the underlying GTAP Data Base are referred to Dimaranan (2006). The GTAP data base (Dimaranan, 2006) is changed in the following three ways to obtain a database for GDyn: a) Six new arrays, listed in table 1, are added to the standard GTAP data file. The values of regional savings also change from those in the standard GTAP Data Base. The dimension of the array however does not change. These changes are discussed in section 2 below. b) A new parameters file contains the seven new parameters used in the dynamic theory (Table 2). The methodology for estimating econometrically, and in some 1 We have occasion at various points to refer to specific versions of the GDyn data base. We use a version numbering system of the form <GTAP release>:<GDyn version>. The element <GDyn version> is of the form <GDyn major version>.<GTAPDyn minor version>. We declare a new major version to mark a major difference in data content; a new minor version, to mark a change in format or a minor change in content. For example, version 6:1.0 of the GDyn data base is based on release 6 of the GTAP data base. Version 6:2.0 is based on the same GTAP release, but incorporates more recent GDyn specific data. At the time of writing, the current version is 6:2.0.

Dodging Bullets: The Heterogeneous Effect of Political Violence on Greenfield FDI

The relationship between political violence and greenfield foreign direct investment is contingent on the type of violence, the characteristics of the investment-receiving sector, and the international scope of the investing firm. Analysis using a dynamic fixed effects model for a panel of 90 developing countries shows that nationwide political conflict is negatively associated with total and nonresource-related greenfield FDI, but not with resource-related greenfield FDI. The insensitivity of resource FDI to political conflict is explained by the high profitability of natural-resource extraction and geographic constraints on location choice. In the nonresource sector, the least geographically diversified firms are most sensitive to conflict. Other types of political violence, including intermittent violence in the form of terrorist acts and assassinations, or persistent but low-impact events, such as political terror, have no effect on the location choice decisions of multinational enterprises. These findings inform the strategies of multinationals with a nuanced and much-needed understanding of the effects of political violence and the risks it poses to their businesses.RésuméLa relation entre la violence politique et l’investissement direct étranger (IDE) ex-nihilo dépend du type de violence, des caractéristiques du secteur concerné par l’investissement et de la portée internationale de la firme qui investit. L’analyse avec un modèle dynamique à effets fixes pour un panel de 90 pays en développement montre qu’un conflit politique à portée nationale est négativement associé à l’IDE ex-nihilo complet et non lié aux ressources, mais pas à l’IDE ex-nihilo lié aux ressources. L’insensibilité de l’IDE lié aux ressources au conflit politique est expliquée par la forte rentabilité de l’extraction de ressources naturelles et les contraintes géographiques en matière de choix de localisation. Dans le secteur non lié aux ressources, les firmes les moins diversifiées géographiquement sont les plus sensibles au conflit. D’autres types de violence politique, intégrant la violence occasionnelle sous forme d’actes terroristes et d’assassinats, ou des événements persistants ayant un faible impact comme la terreur politique, n’ont aucun effet sur les décisions en matière de choix de localisation des entreprises multinationales. Ces résultats informent sur les stratégies des multinationales avec une compréhension nuancée et très utile des effets de la violence politique et des risques qu’elle pose pour leurs activités.ResumenLa relación entre la violencia política y la inversión extranjera directa en proyectos totalmente nuevos (greenfield) es contingente al tipo de violencia, las características del sector receptor de inversión, y el alcance internacional de la firma inversora. Un análisis con un modelo dinámico de efectos fijos para un panel de 90 países en vía de desarrollo muestra que el conflicto político nacional se asocia negativamente con la IED total y los proyectos nuevos no relacionados con recursos, pero no con la IED en proyectos nuevos. La falta de sensibilidad de la IED en recursos al conflicto político es explicada por la alta rentabilidad de la extracción de recursos naturales y las limitaciones geográficas en la elección de localización. En el sector no relacionado con recursos, las empresas menos diversificadas geográficamente son más sensibles al conflicto. Otros tipos de violencia política, incluyendo la violencia intermitente en la forma de ataques terroristas y asesinatos, o acontecimientos persistentes, pero de bajo impacto, como el terror político, no tienen efecto en las decisiones de ubicación de las empresas multinacionales. Estos hallazgos informan las estrategias de las multinacionales con un entendimiento matizado y necesitado de los efectos de la violencia política y los riesgos que posee en sus negocios.ResumoA relação entre a violência política e o investimento estrangeiro direto (FDI) está condicionada ao tipo de violência, às características do setor receptor de investimentos e ao escopo internacional da empresa investidora. A análise com um modelo dinâmico de efeitos fixos para um painel de 90 países em desenvolvimento mostra que o conflito político de âmbito nacional está negativamente associado com o FDI total e o do tipo greenfield associado a recursos, mas não com o FDI do tipo greenfield associado a recursos. A insensibilidade do FDI de recursos ao conflito político é explicada pela alta rentabilidade da extração de recursos naturais e restrições geográficas na escolha de locais. No setor de não-recursos, as empresas menos diversificadas geograficamente são mais sensíveis ao conflito. Outros tipos de violência política, incluindo a violência intermitente sob a forma de atos terroristas e assassinatos, ou eventos persistentes, mas de baixo impacto, como o terror político, não têm efeito nas decisões de escolha de localização de empresas multinacionais. Esses resultados informam as estratégias das multinacionais com uma compreensão sutil e muito necessária dos efeitos da violência política e dos riscos que ela representa para seus negócios.概要政治暴力和新建外国直接投资之间的关系取决于暴力类型、投资接收行业特征以及投资公司国际范围。用动态固定效应模型对一组90个发展中国家的分析显示,全国范围内的政治冲突与总的及非资源相关的新建FDI是负相关的,而与资源相关的新建FDI则不是。资源FDI对政治冲突的不敏感可由自然资源开采的高利润率和区位选择的地理限制来解释。在非资源领域,在地理上最少分散的公司对冲突最为敏感。其它类型的政治暴力,包括以恐怖和刺杀,或持续的但低影响力的事件,如政治恐怖形式出现的间歇型暴力,对跨国企业的区位选择决定没有任何影响。这些研究结果对跨国公司战略提供了对政治暴力的影响以及它对公司业务所构成风险的细微和急需的认识。

Dynamic Modeling and Applications for Global Economic Analysis: Implementing the Dynamic GTAP Model in the RunDynam Software

The purpose of this chapter is to introduce the reader to the publicly available software – RunDynam – which is used to carry out the applications presented in Part III of this book. The RunDynam program is based on the GEMPACK suite of software (Harrison and Pearson, 1999), which is specifically designed to solve non-linear general equilibrium models. Other general equilibrium models solved using the GEMPACK software suite include the standard GTAP model and the Monash model of Australia. The RunDynam program has been specially tailored to the needs of the GDyn model and other dynamic models. It offer the user a great deal of flexibility in constructing simulations. It is available from the Centre of Policy Studies at Monash University, Australia.

Dynamic Modeling and Applications for Global Economic Analysis: APPLICATIONS OF DYNAMIC GTAP

The book presents applications that deal with important policy issues using an original global dynamic CGE framework. The applications can be grouped into two major areas – environmental and integration issues. The environmental issues, well suited for analysis with dynamic GTAP, range from CO2 emissions trading, to carbon policies such as reforestation programs and carbon subsidies, to technological progress in agriculture. The rest of the applications focus on integration issues and issues on which there are very few simulation studies such as behind the border measures (e.g. rules governing foreign investment, e-commerce regulations, trade in services, harmonization of technical standards, sanitary and phyto-sanitary regulations, the streamlining of customs procedures), demographic change and migration. Available for purchase at: Cambridge University Press Applications available at: www.gtap.agecon.purdue.edu/models/Dynamic/applications.asp

Dynamic Modeling and Applications for Global Economic Analysis: INTRODUCTION AND OVERVIEW

The book presents applications that deal with important policy issues using an original global dynamic CGE framework. The applications can be grouped into two major areas – environmental and integration issues. The environmental issues, well suited for analysis with dynamic GTAP, range from CO2 emissions trading, to carbon policies such as reforestation programs and carbon subsidies, to technological progress in agriculture. The rest of the applications focus on integration issues and issues on which there are very few simulation studies such as behind the border measures (e.g. rules governing foreign investment, e-commerce regulations, trade in services, harmonization of technical standards, sanitary and phyto-sanitary regulations, the streamlining of customs procedures), demographic change and migration. Available for purchase at: Cambridge University Press Applications available at: www.gtap.agecon.purdue.edu/models/Dynamic/applications.asp