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Computable General equilibrium Models in Environmental and Resource Economics

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  • Conrad, Klaus
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    Abstract

    The focus of this survey chapter is on the importance of general equilibrium interactions in assessing efficiency costs of environmental policies. Those interactions are relevant to the impacts of a wide range of government policies to control air pollution, deforestation or water quality. These policies raise the costs of output and the distortions in factor markets from preexisting market imperfections and imply higher social costs than would be indicated by partial equilibrium models. Although computable general equilibrium models (CGE models) cannot be used to forecast business cycles, they can indicate likely magnitudes of policy-induced changes from future baselines, and they are indispensable for ranking alternative policy measures. Since these numerical models are based on assumptions concerning the economic development (elasticities of substitution, technical change, or the magnitude of exogenous variables) it would be misleading to base policy decisions on a specific numerical result. Rather, CGE models should be used to understand the reasons for particular results, to better frame the policy decisions, and to support the appropriate policy judgements. Using general equilibrium theory, economists can very often get a good idea of the welfare effect and of the qualitative results from a change in a given policy instrument.

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    File URL: https://ub-madoc.bib.uni-mannheim.de/1010/1/601.pdf
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    Bibliographic Info

    Paper provided by Institut fuer Volkswirtschaftslehre und Statistik, Abteilung fuer Volkswirtschaftslehre in its series Discussion Papers with number 601.

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    Date of creation: 2001
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    Handle: RePEc:mnh:vpaper:1010

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    1. Lee, Hiro & Roland-Holst, David, 1997. "The environment and welfare implications of trade and tax policy," Journal of Development Economics, Elsevier, vol. 52(1), pages 65-82, February.
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    4. Beghin, John C. & Roland-Holst, David & Van der Mensbrugghe, Dominique, 1995. "Trade Liberalization and the Environment in the Pacific Basin: Coordinated Approaches to Mexican Trade and Environment Policy," Staff General Research Papers 1588, Iowa State University, Department of Economics.
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    16. Klaus Conrad & Stefan Heng, 2002. "Financing road infrastructure by savings in congestion costs: A CGE analysis," The Annals of Regional Science, Springer, vol. 36(1), pages 107-122.
    17. Conrad, Klaus & Schroder, Michael, 1993. "Choosing environmental policy instruments using general equilibrium models," Journal of Policy Modeling, Elsevier, vol. 15(5-6), pages 521-543.
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    21. Goulder Lawrence H., 1995. "Effects of Carbon Taxes in an Economy with Prior Tax Distortions: An Intertemporal General Equilibrium Analysis," Journal of Environmental Economics and Management, Elsevier, vol. 29(3), pages 271-297, November.
    22. Tobin, James, 1969. "A General Equilibrium Approach to Monetary Theory," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 1(1), pages 15-29, February.
    23. Glomsrod, Solveig & Vennemo, Haakon & Johnsen, Torgeir, 1992. " Stabilization of Emissions of CO2: A Computable General Equilibrium Assessment," Scandinavian Journal of Economics, Wiley Blackwell, vol. 94(1), pages 53-69.
    24. Bohringer, Christoph & Rutherford, Thomas F., 1997. "Carbon Taxes with Exemptions in an Open Economy: A General Equilibrium Analysis of the German Tax Initiative," Journal of Environmental Economics and Management, Elsevier, vol. 32(2), pages 189-203, February.
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    Cited by:
    1. Bohringer, Christoph & Loschel, Andreas, 2006. "Computable general equilibrium models for sustainability impact assessment: Status quo and prospects," Ecological Economics, Elsevier, vol. 60(1), pages 49-64, November.

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