Mark Horridge

The Doha Round, Poverty and Regional Inequality in Brazil

This paper addresses the potential effects of the Doha round of trade negotiations on poverty and income distribution in Brazil, using an applied general equilibrium (AGE) and micro-simulation model of Brazil tailored for income distribution and poverty analysis. Of particular importance is the fact that the representative household hypothesis is replaced by a detailed representation of households. The model distinguishes 10 different labor types and has 270 different household expenditure patterns. Income can originate from 41 different production activities (which produce 52 commodities), located in 27 different regions in the country. The AGE model communicates to a micro-simulation model that has 112,055 Brazilian households and 263,938 adults. Poverty and income distribution indices are computed over the entire sample of households and persons, before and after the policy shocks. Model results show that even important trade policy shocks, such as those applied in this study, do not generate dramatic changes in the structure of poverty and income distribution in the Brazilian economy. The simulated effects on poverty and income distribution are positive, but rather small. The benefits are concentrated in the poorest households.

Economic integration, poverty and regional inequality in Brazil

Este trabalho analisa os efeitos potenciais da formacao da ALCA sobre os niveis de pobreza e distribuicao de renda no Brasil. A analise e conduzida atraves de um Modelo Aplicado de Equilibrio Geral e de Micro-simulacao estatico, calibrado com os dados da PNAD 2001. O modelo distingue na sua estrutura 112.055 domicilios e 263.938 adultos, 42 atividades produtivas, 52 produtos, e 27 regioes. Os resultados apontam para o fato de que mesmo mudancas tarifarias grandes como as aqui simuladas nao trariam um forte impacto sobre a pobreza no Brasil, embora os resultados estejam concentrados nos domicilios mais pobres.

Economies of Scale and Imperfect Competition in an Applied General Equilibrium Model of the Australian Economy

Recently some researchers have suggested that economies of scale and imperfect competition play a major role in determining the effects of exogenous policy shocks. Thus they have emphasised the need to incorporate industrial organisation features into computable general equilibrium (CGE) models. However, our knowledge of this new paradigm is still in its infancy it is not yet clear how models of this type should be specified and to what extent their predictions are sensitive to the choice of specification. This paper describes a 23-sector CGE model of the Australian economy, based on ORANI and on Horridge (1987a and 1987b), which incorporates economies of scale and imperfect competition. The model is used to investigate whether adding these new features affects simulation results. We present results for three different types of non-competitive regime and compare these with results generated by a traditional (constant returns and perfect competition) version of the same model.

Long-run Effects on China of APEC Trade Liberalization

Plans for APEC trade liberalisation include the elimination of all tariffs between member states. In this paper we use two computable general equilibrium models to examine the effects of these plans, focussing on China. Our modelling shows that liberalisation increases Chinas capital stock and real GDP. The implication for Chinese industries depend on the extent to which liberalisation exposes them to additional import competition. Industries strongly stimulated include Textiles and Communications Equipment. Transport Equipment is the most adversely affected. Chinese regional results follow from the industrial compositions of the regions, with Zhejiang the most favourably affected and Jilin the least.

A COMPUTABLE GENERAL EQUILIBRIUM MODEL OF URBAN TRANSPORT DEMANDS

Abstract Australian cities suffer from urban sprawl—leading to long average commute distances and high-energy use by urban transport. To investigate this problem, we define and construct a medium-sized general equilibrium model of Australias second- largest city—Melbourne. Individuals are modelled as utility maximizers who face a discrete number of choices. We follow the logit approach, where the probability of an individual pursuing an option (for example, living in high-density housing in zone A while working in zone B) is proportional to the utility derived from that option—taking into account the cost of the option and the effect of this cost on the total utility obtainable with given income-producing opportunities. The spatial layout of the city, through the cost of travel from one zone to another, influences the pattern of land rents, industrial activity, and housing location and density. As in other general equilibrium models, market-clearing and accounting equations allow the whole economy of the city to be presented within an integrated framework. The result is a fairly general economic model of urban land use and travel demands. We use it to analyze the effects of population growth and policy initiatives on transport usage.

Solution Software for Computable General Equilibrium Modeling

We describe the progress of computable general equilibrium (CGE) modeling software since the 1980s and contrast the main systems used today: GAMS, MPSGE and GEMPACK. The development of these general-purpose modeling systems has underpinned rapid growth in the use of CGE models, and allowed models to be shared and their results replicated. We show how a very simple model may be implemented and solved in all three systems. We note that they produce the same numerical results but have different strengths. We conclude by considering some challenges for the future.

A multi‐regional representation of China's agricultural sectors

Purpose - The purpose of this paper is to outline a version of SinoTERM, a multi-regional computable general equilibrium (CGE) model of China that has been updated and disaggregated further to enhance the agricultural detail. A version of the model is publicly available and will be useful to CGE modelers studying Chinese agricultural issues ( Design/methodology/approach - The paper outlines data sources for building SinoTERM. It contains a CGE application to agriculture in China. Unlike the national input-output table published by the National Bureau of Statistics, the master database of SinoTERM contains many agricultural sectors. Findings - CGE models that represent a nation as a single economy may offer rich insights into winners and losers from particular policy scenarios. Multi-regional analysis takes this a step further by comparing outcomes for regions in which particular industries are a relatively large part of the economy. Research limitations/implications - This paper builds on the first SinoTERM paper in several ways. First, the database is disaggregated further to represent tea, sugar cane and silkworms as individual sectors in the CGE database. Second, given the extraordinary economic growth in China, the national and regional database has been updated to 2006 using data from the 2007 yearbook. Third, the paper contains an application to agriculture: it examines the impacts of productivity growth in different agricultural sectors in China. Originality/value - The regional CGE model used in this application could be used to explore many other policy issues concerning agriculture in China.

Deforestation Control and Agricultural Supply in Brazil

Brazil has dramatically increased its agricultural area under cultivation, in the process becoming a major food exporter at the cost of natural forests. A new challenge is to meet the food demands of an expanding world population in the face of pessimistic climate change scenarios and the increasing scarcity of land. Can Brazil help meet rising world food demand while conserving its tropical rainforests? To address this question we simulate outcomes using a large dynamic multiregional computable general equilibrium model of Brazil to model land use over 20 years in 90 zones and 14 agricultural sectors. The model features a land-use change module based on a transition matrix obtained from satellite imagery. We analyze two scenarios of deforestation reduction, both linked to actual policy proposals. Model results indicate several mechanisms that allow food output to increase without expanding land supply. In particular, we stress the role of Brazils vast, low-yield pasture area as a source of future cropland. Thus, we find that controlling deforestation leads to rather small decreases in food output-which could be neutralized by tiny exogenous productivity improvements. We conclude that the decrease in deforestation will not significantly compromise Brazilian agricultural supply capacity in the foreseeable future.

A Conceptual Framework for Integrated Economic–Environmental Modeling

Economy-wide models such as computable general equilibrium (CGE) models are powerful tools that provide insights on policy impacts on standard economic indicators. With the recent publication of the System of Environmental-Economic Accounting (SEEA), the power of this approach is amplified. This article addresses an important gap in economy-wide policy modeling applications and literature by developing a conceptual framework for the integration of the SEEA in the CGE framework, enabling for the first time the analysis of policy impacts on the economy and the environment in a quantitative, comprehensive, and consistent framework. Previous integrated modeling efforts have generally focused on the interaction between the economy and one environmental resource in isolation, requiring significant data reconciliation. Integration of SEEA into a CGE circumvents this resource intense process, enhancing analytical power, obviating the need for strong assumptions in reconciling economic–environmental data, reducing start-up costs, and increasing the timeliness of evidence-based policy advice.

Forecasting versus policy analysis with the ORANI model

ORANI is a detailed general equilibrium model of the Australian economy. It has been applied many times by economists in universities, government departments and business in analyses of the effects on industries, occupational groups and regions of changes in policy variables (e.g., taxes and subsidies) and in other aspects of the economic environment (e.g., world commodity prices). These applications have been comparative static, i.e, they have been concerned with questions of how different the economy would be with and without the changes under investigation. They have not been concerned with forecasting the future state of the economy. More recently we have experimented with the model for forecasting. In a pilot exercise (Dixon, 1986), ORANI was used to forecast growth rates of industry outputs in Australia for the period 1985-1990. This revealed some problems inherent in the use of computable general equilibrium models for forecasting. In section 2, we describe the difference between comparative static analysis and forecasting, in general terms, and with specific reference to the ORANI model. We also discuss some computational difficulties which arise in applying ORANI to forecasting. in section 3 we present some numerical examples to supplement the theoretical material in section 2. Finally, section 4 contains some brief concluding comments on the strengths and limitations of ORANI as a forecasting device.