A standard computable general equilibrium (CGE) model in GAMS

Over the past decade, the increasing power and reliability of microcomputers and the development of sophisticated software designed specifically for use with them has led to significant changes in the way quantitative food policy analysis is conducted. These changes cover most aspects of the analysis, ranging from the collections and analysis of socioeconomic data to the conduct of model-based policy simulations. The venue of the computations has shifted from off-site mainframes dependent on highly trained operators and significant capital investment in supporting equipment, to desktop and laptop computers dependent only on the occasional availability of electricity. This means that it is now feasible to quickly transfer new techniques between IFPRI and its collaborators in developing countries, that the costs of policy analysis have been substantially reduced, and that a new level of complexity and accuracy in policy analysis is now possible. As with any new technology, however, substantial costs in time and money are involved in learning the most efficient ways of using this new technology and then transmitting these lessons to others. This series, Microcomputers in Policy Research, represents IFPRI’s ongoing collective experience in adapting microcomputer technology for use in food policy analysis in developing countries. Publication decisions are made on the basis of a review by an external referee. The manuals in the series are primarily for the purpose of sharing these lessons with potential users in developing countries, although persons and institutions in developed countries may also find them useful. The series is designed to provide hands on methods for quantities food policy analysis. In our opinion, examples provide the best and clearest form of instruction; therefore, examples--including actual software codes wherever relevant--are used extensively throughout this series. Computable general equilibrium (CGE) models are used widely in policy analysis, especially in developed-country academic settings. The purpose of the fifth volume in the series, A Standard Computable General Equilibrium (CGE) Model in GAMS, by Hans Lofgren, Rebecca Lee Harris, and Sherman Robinson, with assistance from Marcelle Thomas and Moataz El-Said, is to contribute to and facilitate the use of this class of models in developing countries. The volume includes a detailed presentation of a static "standard" CGE model and its required database. The model is written for application at the country level; however, only minimal changes are needed before it can be applied to a region within a country (such as a village) or to a farm household involved in production and consumption activities. The model incorporates features developed over recent years through IFPRI’s research projects. These features--of particular importance in developing countries--include household consumption of nonmarketed ("home") commodities, explicit treatment of transaction costs for commodities that enter the market sphere, and a separation between production activities and commodities that permits any activity to produce multiple commodities and any commodity to be produced by multiple activities. The manual discusses the implementation of the model in GAMS (the General Algebraic Modeling System) and is accompanied by a CD-ROM that includes the GAMS files for the model, sample databases, simulations, solution reports, and a social accounting matrix (SAM) aggregation program. Although the volume provides a standardized framework for analysis, the analyst is not forced to make "one-size-fits-all" assumptions. The GAMS code is written to give the analyst considerable flexibility in model specification.