Raúl Hinojosa-Ojeda

From stylized to applied models:: Building multisector CGE models for policy analysis

Abstract This paper describes how to build multisector computable general equilibrium models for policy analysis. The article presents the social accounting matrix (SAM) that provides the conceptual framework linking together different components of the model and furnishes much of the data as well. This is followed by the equations of the core CGE model and by a description of how the core model is implemented using the GAMS software. The article proceeds to describe how the model’s benchmark data and parameters are derived from the SAM. The final section uses data from an African country to consider how the GAMS model can be applied to evaluate the economic impact of capital inflows.

Agricultural policies and migration in a U.S.-Mexico free trade area: A computable general equilibrium analysis

Abstract A United States-Mexico agreement to form a free trade area (FTA) is analyzed using an 11-sector, three-country, computable general equilibrium model that explicity models farm programs and labor migration. The model incorporates both rural-urban migration within Mexico and international migration between Mexico and the United States. In the model, sectoral import demands are specified with a flexible functional form, an empirical improvement over earlier specifications, which use a constant elasticity of substitution function. Using the model, we identify trade-offs among bilateral trade growth, labor migration, and agricultural program expenditures under alternative FTA scenarios. Trade liberalization in agriculture greatly increases rural- urban migration within Mexico and migration from Mexico to the United States. Migration is reduced if Mexico grows relative to the United States and also if Mexico retains farm support programs. However, the more support that is provided to the Mexican agricultural sector, the smaller is bilateral trade growth. The results indicate a policy trade-off between rapidly achieving gains from trade liberalization and providing a transition period long enough to assimilate displaced labor in Mexico without undue strain.

Regional integration options for Central America and the Caribbean after NAFTA

Abstract From the adoption of NAFTA to the movement toward Mercosur, the entire hemisphere faces a wide range of options for choosing a new integration agenda, one that muse be able to provide for global competitiveness and equitable growth while being politically sustainable in both the United States and Latin America. In this article, we present a computable general equilibrium (CGE) model for analyzing the effects of alternative integration strategies in the United States, Mexico, Central America, and the Caribbean. The CGE model simulates the static and dynamic effects of alternative integration scenarios on production, income distribution, and the flows of trade, capital, and labor migration. The results point to a number of essential strategic choices that will have to be made in order to generate the most optimal regional outcome. Such an outcome will be possible if and only if: (1) the United States is able to overcome a domestic political economy debate on the distribution of the gains from trade which could then allow it to provide a strategic leadership role in the region, and (2) the Latin American countries in the region resolve an almost classic “prisoners dilemma” collective action problem. As a NAFTA partner with veto power, Mexico thus must make a key decision: to share the NAFTA market with its competitors or to block NAFTA accession and risk unilateral U.S. FTAs with Mexicos rivals and geopolitical neighbors.

Economic integration and structural adjustments in North America, Central America and the Caribbean: A computable general equilibrium approach

Abstract The articles in this special issue are part of the results of an multinational research project entitled: “Regional Integration in Greater North America: A Research, Training and Policy Program.” It would have been impossible to undergo this multinational task without the economic support so kindly granted by the Ford Foundation and the continuous support of Dr. Norman Collins and Dr. Michael Conroy, both of whom worked for the Ford Foundation in Mexico City. The project also benefited from the institutional support of El Colegio de Mexico (COLMEX), the Fundacion Nacional de Desarrollo (FUNDE), from the University of California, Los Angeles, the University of California, Davis, as well as from the Inter–American Development Bank and the governments of the countries included in this study. This volume is the result of intense and collective work, not only by the authors of the articles, but also from other researchers and from officials belonging to various institutions in Central America, the Caribbean, Mexico and the United States. We wish to give our special thanks to Alfonso Goitia, Ph.D., Executive Director of FUNDE, El Salvador, for his support as well as his researchers, Mario Lungo and Sonia Baires. We also wish to thank Mr. Oscar Rene Cardona for his help during the first stages of our research for Guatemala. We would like to thank Professor Victor Bulmer Thomas for his support as well as the authorities from the Banco Central de Guatemala for their help in building the database used in our investigation of this country’s economy.

An Even Greater “U-Turn”

Since the mid-1970s the United States has been experiencing a profound shift in both the nature and political management of the post-World War II pattern of economic development and income distribution. This “Great U-Turn,” so labeled by Bluestone and Harrison (1988), has been characterized by the dramatic reversal after 1973 of the postwar rise in real wages and relative stability or decline in inequality. Since that time, real wages have stagnated or fallen and the distribution of income and wealth has become more unequal.