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Economies of Scale and Imperfect Competition in an Applied General Equilibrium Model of the Australian Economy

  • Kaludura Abayasiri-Silva
  • Mark Horridge

Recently some researchers have suggested that economies of scale and imperfect competition play a major role in determining the effects of exogenous policy shocks. Thus they have emphasised the need to incorporate industrial organisation features into computable general equilibrium (CGE) models. However, our knowledge of this new paradigm is still in its infancy it is not yet clear how models of this type should be specified and to what extent their predictions are sensitive to the choice of specification. This paper describes a 23-sector CGE model of the Australian economy, based on ORANI and on Horridge (1987a and 1987b), which incorporates economies of scale and imperfect competition. The model is used to investigate whether adding these new features affects simulation results. We present results for three different types of non-competitive regime and compare these with results generated by a traditional (constant returns and perfect competition) version of the same model.

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Paper provided by Victoria University, Centre of Policy Studies/IMPACT Centre in its series Centre of Policy Studies/IMPACT Centre Working Papers with number op-84.

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Date of creation: Mar 1996
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Handle: RePEc:cop:wpaper:op-84
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  1. Devarajan, Shantayanan & Rodrik, Dani, 1989. "Trade Liberalization in Developing Countries: Do Imperfect Competition and Scale Economies Matter?," American Economic Review, American Economic Association, vol. 79(2), pages 283-87, May.
  2. Richard Harris, 1983. "Applied General Equilibrium Analysis of Small Open Economies with Scale Economies and Imperfect Competition," Working Papers 524, Queen's University, Department of Economics.
  3. Hertel, Thomas & Lanclos, D. Kent & Thursby, Marie, 1991. "General Equilibrium Effects of Trade Liberalization in the Presence of Imperfect Competition," 1991 Conference, August 22-29, 1991, Tokyo, Japan 183247, International Association of Agricultural Economists.
  4. Peter Cory & Mark Horridge, 1985. "A Harris-style miniature version of ORANI," Centre of Policy Studies/IMPACT Centre Working Papers op-54, Victoria University, Centre of Policy Studies/IMPACT Centre.
  5. Randall Wigle, 1988. "General Equilibrium Evaluation of Canada-U.S. Trade Liberalization in a Global Context," Canadian Journal of Economics, Canadian Economics Association, vol. 21(3), pages 539-64, August.
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