Linking CGE and microsimulation models: a comparison of different approaches
In the literature that studies income inequality and poverty, a recent development has been the development of models that link together a macroeconomic model (usually a Computable General Equilibrium (CGE) model) and a microsimulation model. Linking the two types of model allows the modeller to take into account full agents? heterogeneity, whilst at the same time considering the general equilibrium effects of a proposed policy reform. In this paper, I first review in detail three approaches to building linked CGE-microsimulation models: one in accordance with the fully integrated approach, and two following the layered approach (the so-called Top-Down and Top-Down/Bottom-Up approaches). The principal goal of the paper is to present a considered evaluation of the merits and demerits of these alternative methods currently used to link CGE and microsimulation models. To do so I use all three approaches to model the macro- and micro-economic impacts of a policy shock to an archetypical economy (constructed using fictitious data), and compare the results. This analysis highlights the importance of (i) consistency between the underlying macro- and micro-data; and (ii) the precise mechanisms by which feedback effects are passed between the macro and micro models. I develop this latter point further by detailed analysis of the TD/BU approach outlined by Savard (2003), leading to a proposed refinement in the way that feedback effects from the micro level of analysis are incorporated back into the CGE model.
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Francisco Ferreira & Julie Litchfield, 2001. "Education or Inflation? The Micro and Macroeconomics of the Brazilian Income Distribution During 1981-1995," Latin American Journal of Economics-formerly Cuadernos de Economía, Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 38(114), pages 209-238.
- John Cockburn, 2002.
"Trade Liberalisation and Poverty in Nepal: A Computable General Equilibrium Micro Simulation Analysis,"
CSAE Working Paper Series
2002-11, Centre for the Study of African Economies, University of Oxford.
- John Cockburn, 2004. "Trade Liberalisation and Poverty in Nepal A Computable General Equilibrium Micro Simulation Analysis," Development and Comp Systems 0409012, EconWPA.
- Anne-Sophie Robilliard & Sherman Robinson, 2003. "Reconciling Household Surveys and National Accounts Data Using a Cross Entropy Estimation Method," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 49(3), pages 395-406, 09.
- Robilliard, Anne-Sophie & Robinson, Sherman, 1999. "Reconciling household surveys and national accounts data using a cross entropy estimation method:," TMD discussion papers 50, International Food Policy Research Institute (IFPRI).
- Robinson, Sherman & Cattaneo, Andrea & El-Said, Moataz, 1998. "Estimating a social accounting matrix using cross entropy methods:," TMD discussion papers 33, International Food Policy Research Institute (IFPRI).
- BUSSOLO Maurizio & LAY Jann, "undated". "Globalization and Poverty Changes in Colombia," EcoMod2003 330700029, EcoMod.
- Maurizio Bussolo & Jann Lay, 2003. "Globalisation and Poverty Changes in Colombia," OECD Development Centre Working Papers 226, OECD Publishing.
- Luc Savard, 2003. "Poverty and Income Distribution in a CGE-Household Micro-Simulation Model: Top-Down/Bottom Up Approach," Cahiers de recherche 0343, CIRPEE.
- John Creedy & Guyonne Kalb, 2005. "Discrete Hours Labour Supply Modelling: Specification, Estimation and Simulation," Journal of Economic Surveys, Wiley Blackwell, vol. 19(5), pages 697-734, December.
- John Creedy & Guyonne Kalb, 2003. "Discrete Hours Labour Supply Modelling: Specification, Estimation and Simulation," Melbourne Institute Working Paper Series wp2003n16, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
- John Creedy & Guyonne Kalb, 2003. "Discrete Hours Labour Supply Modelling: Specification, Estimation and Simulation," Treasury Working Paper Series 03/20, New Zealand Treasury.
- John Creedy & Guyonne Kalb & Rosanna Scutella, 2003. "Discrete Hours Labour Supply Modelling: Specification, Estimation and Simulation," Melbourne Institute Working Paper Series wp2003n21, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
- Decaluwé, Bernard & Dumont, Jean-Christophe & Savard, Luc, 2000. "Measuring Poverty and Inequality in a Computable General Equilibrium Model," Cahiers de recherche 9926, Université Laval - Département d'économique.
- Denis Cogneau & Anne-Sophie Robilliard, 2004. "Poverty Alleviation Policies in Madagascar: a Micro-Macro Simulation Model," Working Papers DT/2004/11, DIAL (Développement, Institutions et Mondialisation), revised Nov 2004.
- Denis Cogneau, 2001. "Formation du revenu, segmentation et discrimination sur le marché du travail d'une ville en développement : Antananarivo fin de siècle," Working Papers DT/2001/18, DIAL (Développement, Institutions et Mondialisation).
- Caesar B. Cororaton & John Cockburn, 2005. "Trade Reform and Poverty in the Philippines: a Computable General Equilibrium Microsimulation Analysis," Cahiers de recherche 0513, CIRPEE.
- Decaluwe, B. & Patry, A. & Savard, L. & Thorbecke, E., 1999. "Poverty Analysis Within a General Equilibrium Framework," Cahiers de recherche 9909, Université Laval - Département d'économique.
- Decaluwe, B. & Patry, A. & Savard, L. & Thorbecke, E., 1999. "Poverty Analysis Within a General Equilibrium Framework," Papers 9909, Laval - Recherche en Politique Economique.
- repec:dau:papers:123456789/4584 is not listed on IDEAS
- John Creedy & Alan S. Duncan & Mark Harris & Rosanna Scutella, 2002. "Microsimulation Modelling of Taxation and the Labour Market," Books, Edward Elgar Publishing, number 2796. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:ijm:journl:v:3:y:2010:i:1:p:72-91. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Jinjing Li)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.