Ferran Sancho

An evaluation of the performance of an applied general equilibrium model of the Spanish economy

SummaryIn 1985–86 the authors were members of a team that constructed a static applied general equilibrium model that was used to analyze the impact on the Spanish economy of the 1986 fiscal reform, which accompanied Spains entry into the European Community. This paper compares the results obtained to recently published data for 1985–87; we find that the model performed well in predicting the changes in relative prices and resource allocation that actually occurred, particularly if we incorporate exogenous shocks that affected the Spanish economy in 1986. We also analyze the sensitivity of the results to alternative specifications of the labor market and macroeconomic closure rules; we find that the central results are robust.

AN APPLIED GENERAL EQUILIBRIUM MODEL TO ASSESS THE IMPACT OF NATIONAL TAX CHANGES ON A REGIONAL ECONOMY

This paper presents two versions of an applied general equilibrium model for the regional economy of Andalusia, Spain, that differ in the Public Sector behavior. We intend to exemplify the use of a model with these characteristics to analyze the impact that the reform of the personal income tax (Act 40/98) implemented in Spain as a whole would have had on the Andalusian region in particular. Such an important tax reform is bound to affect the behavior of the agents in this economy, both in the microeconomic and the derived macroeconomic spheres. The general character of the tax reform under analysis and the relations among the different economic agents advise us to use models with these characteristics to study the effects of this reform. The models is of the neoclassical variety and include not only the productive sectors of the economy but also the foreign sector and the government, which are usually absent from theoretical general equilibrium models. Both versions of the model are calibrated by using a Social Accounting Matrix of Andalusia for 1995.

INPUT–OUTPUT ANALYSIS: THE NEXT 25 YEARS

This year marks the 25th anniversary of the International Input–Output Association and the 25th volume of Economic Systems Research. To celebrate this anniversary, a group of eight experts provide their views on the future of input–output. Looking forward, they foresee progress in terms of data collections, methods, theory testing, and focus and scope.

Modeling Prices in a SAM Structure

The aim of this paper is to develop an intersectoral price model in a social accounting matrix. Traditionally, the emphasis of the social accounting methodology has been on quantity oriented models and their income effects. In contrast, the authors use the social accounting matrix to develop a price model that captures the interdependence among activities, households, and factors and provides a complete set of accounting prices. Furthermore, they use decomposition techniques to trace underlying general equilibrium effects. Copyright 1995 by MIT Press.

Missing links in key sector analysis

Abstract In general terms, key sectors analysis aims at identifying and quantifying the economic impact of a sector in a given economy. For a sector, we mean here either an industry or a region, or even a cluster of them. Quite a few measures and methodologies of varied complexity have been proposed in the literature, from multiplier sums to extraction methods, but not without debate about their properties and information content. All of them, to our knowledge, focus exclusively on the interdependence effects that result from an input–output structure of the economy. By so doing the approach misses critical links beyond the interindustry ones. A productive sectors role is that of producing but also that of generating and distributing income among primary factors and households as a result of production. Thus, when measuring a sectors role, the income generating process should not be omitted if we want to elucidate the sectors true economic impact. A simple way to make the missing income links explicit is to use the SAM (Social Accounting Matrix) facility. Extending an extraction methodology to the SAM we compare lost output with and without the missing links. We observe that substantial differences in sectoral lost gross output arise but, even more important, we capture the implied shifting in the rank ordering of sectors.

A general equilibrium analysis of the 1986 tax reform in Spain

Spain’s recent entry into the European Economic Community (EEC) has been accompanied by a number of economic reforms needed to comply with requirements imposed on a11 member countries. A key ingredient of these reforms has been the introduction on I January 1986 of a vaiue-added tax (VAT) on consumption as a substitute for a complex range of indirect taxes, including a turnover tax applied at every stage of the production process. The fiscal reform has posed a number of interesting policy questions. For instance, one common criticism of the new tax system is that its rates have been chosen too high and will further depress the economy, whose oflicial unemployment rate was 22% in 1985. Government officials are very concerned, however, with the effect of the new tax system on public revenues and, in turn, on the substantial deficit of the public sector, which was 8% of GDP in 1985. Another current debate centers on whether the new tax system has a detrimental impact on the capital-labor ratio due to the retention of social security taxes, which are taxes on the use of labor. In this paper we use an applied general equilibrium model of the Spanish economy to analyze the impacts of the indirect tax reform on relative prices, resource allocation, and income distribution, using the information contained in the social accounting matrix constructed by Kehoe et al. (1985). In the next section we describe the model, placing emphasis on its novel features. In

Energy intensities and CO2 emissions in Catalonia: a SAM analysis

In this paper, we estimate sectoral energy intensities and CO2 emissions for the Catalonian economy. In order to evaluate energy intensities, we use the SAM (Social Accounting Matrix) multiplier analysis applied to a SAM of the economy. CO2 emissions are estimated by means of the Leontief input-output submodel of the SAM, together with a table of coefficients of emissions per unit of monetary expenditures. This new methodology allows us to dispense with energy input-output tables for the base period. Our results are of the same order of magnitude as others obtained by physical measurement methods. We also simulate how changes in demand and energy energy efficiency parameters may affect CO2 emissions for the economy.

CALIBRATION OF CES FUNCTIONS FOR REAL-WORLD MULTISECTORAL MODELING

We show how to calibrate CES production and utility functions when indirect taxation affecting inputs and consumption is present. These calibrated functions can then be used in computable general equilibrium models. Taxation modifies the standard calibration procedures since any taxed good has two associated prices and a choice of reference value units has to be made. We also provide an example of computer code to solve the calibration of CES utilities under two alternate normalizations.

An analysis of Spain's integration in the EEC

Abstract Spains recent entry into the European Economic Community (EEC) provides a good opportunity to study the impact of economic integration on a relatively small country. The EEC goal to become a single market by the end of 1992 requires, on the one hand, the elimination of all barriers to the movement of goods, services, labor, and capital within the community boundaries and, on the other, a certain harmonization of the legal setting in which economic activity takes place. The paper studies the impact on the Spanish economy of policies undertaken, or still under consideration, by the community in its attempt to complete the internal market. More specifically, we examine the effects of (1) the elimination of barriers to trade; (2) the liberalization of the financial sector and capital flows; and (3) the fiscal harmonization of indirect taxes.

REVISITING THE ORIGINAL GHOSH MODEL: CAN IT BE MADE MORE PLAUSIBLE?

We reconsider in this paper the alleged implausibility of Ghoshs model and we do so reformulating the model to incorporate an alternative closure rule. Our proposed closure rule is in line with the original allocation rules defined by A. Ghosh. The closure solves, to some extent, the implausibility problem that was pointed out by Oosterhaven, for then value-added is correctly computed and responsive to allocation changes resulting from supply shocks. Some numerical examples illustrate the sectoral and aggregate consistency of the allocation equilibrium.