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Combining microsimulation with CGE and macro modelling for distributional analysis in developing and transition countries

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  • James B Davies

    () (Department of Economics, University of Western Ontario, London, Canada N6A 5C2)

Abstract

This paper overviews recent work that has attempted to bring together microsimulation, Computable General Equilibrium (CGE) and macro models to perform distributional analysis in developing and transition countries. Particular attention is paid to applications relating to aspects of economic growth and political economy. Applications in which macro, CGE and microsimulation models are either layered or integrated are considered. It is demonstrated that different combinations of such models, including those where only a single model-type is used, are appropriate for different problems. For short-run impact analysis, microsimulation on its own may be appropriate. For longer-run analyses, where interest is in the interrelationship between changes in disposable income, consumption and labour supply, these models need to be supplemented a combination of microsimulation on the one hand, and general equilibrium price changes or changes in macro variables on the other hand. In the case of national subregions, or countries embedded in free-trade areas, it is argued that microsimulation may adequately be combined with pure macro models. That is, CGE modelling may not be necessary. For distinct national economies, however, the first step beyond microsimulation should likely be integration with CGE modelling. Whilst much promising work has been undertaken on dynamic integrated CGE microsimulation work in developing countries, CGE work is most advanced for Less Developed Countries. At present several groups of development researchers are found to be putting these two approaches together, and in some cases are adding macroeconomic and financial modelling as well. In contrast, with a few conspicuous exceptions, little such work is being done for the transition economies.

Suggested Citation

  • James B Davies, 2009. "Combining microsimulation with CGE and macro modelling for distributional analysis in developing and transition countries," International Journal of Microsimulation, International Microsimulation Association, vol. 2(1), pages 49-56.
  • Handle: RePEc:ijm:journl:v:2:y:2009:i:1:p:49-56
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    File URL: http://ima.natsem.canberra.edu.au/IJM/V2_1/IJM_2_1_4.pdf
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    Cited by:

    1. Edward J. Balistreri & Maryla Maliszewska & Israel Osorio-Rodarte & David G. Tarr & Hidemichi Yonezawa, 2016. "Poverty and Shared Prosperity Implications of Reducing Trade Costs Through Deep Integration in Eastern and Southern Africa," Working Papers 2016-07, Colorado School of Mines, Division of Economics and Business.
    2. Bourguignon, François & Bussolo, Maurizio, 2013. "Income Distribution in Computable General Equilibrium Modeling," Handbook of Computable General Equilibrium Modeling, Elsevier.
    3. Anke Mönnig, 2011. "Product Tax Modelling - using the dynamic interindustry model INFORGE," EcoMod2011 2912, EcoMod.
    4. Giuditta De Prato & Daniel Nepelski & Wojciech Szewczyk & Geomina Turlea, 2011. "Performance of ICT R&D," JRC Working Papers JRC66116, Joint Research Centre (Seville site).
    5. World Bank & International Monetary Fund, 2016. "Global Monitoring Report 2015/2016," World Bank Publications, The World Bank, number 22547, July.
    6. Nabil Annabi & Maxime Fougere & Min Li, 2013. "Foreign Competition and Income Distribution in Canada: A Dynamic Microsimulation CGE Model Analysis," International Economic Journal, Taylor & Francis Journals, vol. 27(4), pages 525-547, December.
    7. Péter Benczúr & Gábor Kátay & Áron Kiss, 2012. "Assessing changes of the Hungarian tax and transfer system: A general-equilibrium microsimulation approach," MNB Working Papers 2012/7, Magyar Nemzeti Bank (Central Bank of Hungary).
    8. Liyanaarachchi, Tilak S. & Naranpanawa, Athula & Bandara, Jayatilleke S., 2016. "Impact of trade liberalisation on labour market and poverty in Sri Lanka. An integrated macro-micro modelling approach," Economic Modelling, Elsevier, vol. 59(C), pages 102-115.
    9. van Ruijven, Bas J. & O’Neill, Brian C. & Chateau, Jean, 2015. "Methods for including income distribution in global CGE models for long-term climate change research," Energy Economics, Elsevier, vol. 51(C), pages 530-543.
    10. Andreas Peichl, 2016. "Linking Microsimulation and CGE models," International Journal of Microsimulation, International Microsimulation Association, vol. 9(1), pages 167-174.
    11. Benczur, Peter & Katay, Gabor & Kiss, Aron, 2017. "Assessing the Economic and Social Impact of Tax and Transfer System Reforms: A General Equilibrium Microsimulation Approach," Working Papers 2017-09, Joint Research Centre, European Commission (Ispra site).
    12. Balistreri,Edward Jay & Maliszewska,Maryla & Osorio-Rodarte,Israel & Tarr,David & Yonezawa,Hidemichi, 2016. "Poverty and shared prosperity implications of deep integration in Eastern and Southern Africa," Policy Research Working Paper Series 7660, The World Bank.
    13. Matteo Richiardi & John Cockburn & Hélène Maisonnave & Luca Tiberti, 2016. "Editorial," International Journal of Microsimulation, International Microsimulation Association, vol. 9(1), pages 1-4.
    14. Luc Savard & Dorothee Boccanfuso & Jonathan Goyette & Véronique Gosselin & Clovis Tanekou Mangoua, 2014. "An impact analysis of the impact of climate change and adaptation policies on the forestry sector in Quebec. A dyanamic macro-micro framework," EcoMod2014 6787, EcoMod.
    15. Dorothée Boccanfuso & Véronique Gosselin & Jonathan Goyette & Luc Savard & Clovis Tanekou Mangoua, 2014. "An impact analysis of climate change and adaptation policies on the forestry sector in Quebec. A dynamic macro-micro framework," Cahiers de recherche 14-04, Departement d'Economique de l'École de gestion à l'Université de Sherbrooke.

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    Keywords

    CGE; political economy; growth;

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