Economic modeling and the choice of model parameters: Case of land use modeling

While alternative calibration approaches have been developed and widely used in CGE modeling, the existing literature in this area has not been fully developed and lacks important deficiencies. Here, we address two important items. First, the existing literature in this area has been mainly focused on the trade elasticities, the demand elasticities, and the rate substitution among inputs in production functions. Thus far, no major effort has been developed to determine the behavioral parameters that govern supplies of primary inputs such as land and resources in CGE modeling. Only a few preliminary efforts have been made in this area. Second, the existing calibration efforts commonly have determined their desired parameters assuming other model parameters are valid and given. This approach basically ignores interactions among the parameters of a model and their implications. This paper highlights these interactions and their implications.