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Forward looking dynamics in spatial CGE modelling

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  • Bröcker, Johannes
  • Korzhenevych, Artem

Abstract

This paper sets up a spatial dynamic CGE framework by combining the optimal growth model of saving and investment under adjustment costs and the spatial CGE model with Dixit–Stiglitz structure in the modern sector. Because of increasing product diversity on the dynamic equilibrium path, the model belongs to the category of semi-endogenous growth models. We overcome the difficulty of existing multiregional models to correctly approximate the infinite horizon equilibrium by employing a theoretically consistent terminal condition. The distinction of goods, factors, firms, and households by location, and the incorporation of trade costs in the model allow to study a variety of issues in regional and transport economics. We describe the model calibration and a tailor-made solution algorithm. The functionality is demonstrated using two illustrative examples.

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Bibliographic Info

Article provided by Elsevier in its journal Economic Modelling.

Volume (Year): 31 (2013)
Issue (Month): C ()
Pages: 389-400

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Handle: RePEc:eee:ecmode:v:31:y:2013:i:c:p:389-400

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Web page: http://www.elsevier.com/locate/inca/30411

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Keywords: Spatial dynamic CGE modeling; Multiple optimizing agents; Transport costs;

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Cited by:
  1. Attila Varga & Péter Járosi & Tamás Sebestyén, 2011. "Modeling the growth effects of regional knowledge production: The GMR-Europe model and its applications for EU Framework Program policy impact simulations," ERSA conference papers ersa11p1426, European Regional Science Association.
  2. Johannes Bröcker, 2012. "Wider economic benefits from communication cost reductions: an endogenous growth approach," ERSA conference papers ersa12p1165, European Regional Science Association.

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