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Frame-Shifting in Regional General Equilibrium Models

In: Trade, Networks and Hierarchies

Author

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  • Philip R. Israilevich

    (Federal Reserve Bank of Chicago
    University of Illinois)

Abstract

In CGE (Computable General Equilibrium) models, input-output coefficients are balanced row-wise through a supply-demand interaction for a physical commodity. Input-output columns consist of physical flows that require a unique set of prices to balance income and sales of intermediate goods and services. Another type of model, developed originally by Conway (1990, 1991) and further developed by Israilevich et al. (1997), termed the Regional Econometric Input-Output Model [REIM] approach, balances the input-output table rows in value terms. This approach has no physical flows of inputs nor does it have prices. It utilizes Marshallian (see Takayama, 1985) output equilibrium that requires no explicit price values. Since REIM has no prices, it is impossible to impose column-wise constraints. As a result, value-added rows can be considered a residual that creates a potential problem in that the value added may be too small, or even negative, as a result of simulation exercises, impact analyses or forecasts.

Suggested Citation

  • Philip R. Israilevich, 2002. "Frame-Shifting in Regional General Equilibrium Models," Advances in Spatial Science, in: Geoffrey J. D. Hewings & Michael Sonis & David Boyce (ed.), Trade, Networks and Hierarchies, chapter 21, pages 387-405, Springer.
    • Handle: RePEc:spr:adspcp:978-3-662-04786-6_21
    DOI: 10.1007/978-3-662-04786-6_21
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    Cited by:

    1. Kieran Donaghy & Clifford R. Wymer & Geoffrey J. D. Hewings & Soo Jung Ha, 2017. "Structural change in the Chicago region and the impact on emission inventories in a continuous-time modeling approach," Journal of Economic Structures, Springer;Pan-Pacific Association of Input-Output Studies (PAPAIOS), vol. 6(1), pages 1-28, December.

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