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Climate Policy and Trade: Dynamics and the Steady-State Assumption in a multi-regional Framework

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  • Katrin Springer
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    Abstract

    Most dynamic trade models assume steady state or balanced growth. This paper argues while this can be done in a single region model or a model without trade, the steady state assumption is problematic in a multi-regional setting with trade interactions. This paper shows the consequences of assuming a balanced growth path and discusses several problems which are connected to the calibration of recursive dynamic multi-regional trade models. Furthermore, it is demonstrated how different dynamic specifications of the base run path affect the results of a policy scenario by imposing the Kyoto Protocol. The simulations illustrate that a balanced growth path can not be maintained in a multi-regional trade model due to international trade spill-overs. It is shown that the model results and thus the assessment of climate policy options depend substantially on the dynamic specification.

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    File URL: http://www.ifw-members.ifw-kiel.de/publications/climate-policy-and-trade-dynamics-and-the-steady-state-assumption-in-a-multi-regional-framework/kap952.pdf
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    Bibliographic Info

    Paper provided by Kiel Institute for the World Economy in its series Kiel Working Papers with number 952.

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    Length: 40 pages
    Date of creation: Oct 1999
    Date of revision:
    Handle: RePEc:kie:kieliw:952

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    Related research

    Keywords: Growth of open economies; Steady-state; Multi-regional dynamic CGE Model; International environmental problems.;

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    References

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    1. Robert J. Barro, 2013. "Inflation and Economic Growth," Annals of Economics and Finance, Society for AEF, vol. 14(1), pages 121-144, May.
    2. Arnold C. Harberger, 1962. "The Incidence of the Corporation Income Tax," Journal of Political Economy, University of Chicago Press, vol. 70, pages 215.
    3. Mankiw, N Gregory & Romer, David & Weil, David N, 1992. "A Contribution to the Empirics of Economic Growth," The Quarterly Journal of Economics, MIT Press, vol. 107(2), pages 407-37, May.
    4. Alan Manne & Richard Richels, 1992. "Buying Greenhouse Insurance: The Economic Costs of CO2 Emission Limits," MIT Press Books, The MIT Press, edition 1, volume 1, number 026213280x, December.
    5. Campbell, John Y & Mankiw, N Gregory, 1990. "Permanent Income, Current Income, and Consumption," Journal of Business & Economic Statistics, American Statistical Association, vol. 8(3), pages 265-79, July.
    6. Sergio T. Rebelo, 1990. "Long Run Policy Analysis and Long Run Growth," NBER Working Papers 3325, National Bureau of Economic Research, Inc.
    7. Bhattacharyya, Subhes C., 1996. "Applied general equilibrium models for energy studies: a survey," Energy Economics, Elsevier, vol. 18(3), pages 145-164, July.
    8. Springer, Katrin, 1998. "The DART general equilibrium model: A technical description," Kiel Working Papers 883, Kiel Institute for the World Economy.
    9. Nordhaus, William D & Yang, Zili, 1996. "A Regional Dynamic General-Equilibrium Model of Alternative Climate-Change Strategies," American Economic Review, American Economic Association, vol. 86(4), pages 741-65, September.
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    Cited by:
    1. Farmer, Karl & Wendner, Ronald, 2004. "Dynamic multi-sector CGE modeling and the specification of capital," Structural Change and Economic Dynamics, Elsevier, vol. 15(4), pages 469-492, December.
    2. Robert K├╝ster & ingo Ellersdorfer & Ulrich Fahl, 2007. "A CGE-Analysis of Energy Policies Considering Labor Market Imperfections and Technology Specifications," Working Papers 2007.7, Fondazione Eni Enrico Mattei.

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