IDEAS home Printed from https://ideas.repec.org/p/gta/techpp/942.html
   My bibliography  Save this paper

A New Regional Household Demand System for GTAP

Author

Listed:
  • McDougall, Robert

Abstract

The GTAP Model, versions 4.1 and lower, suffers from some defects in the implementation of the regional household demand system. Most seriously, the upper level of the demand system assumes that each regional household faces a fixed price for utility from private consumption. But with a private consumption demand system of the CDE form, the price of utility from private consumption depends on the level of private consumption expenditure. With no fixed price for utility from private consumption, the familiar Cobb-Douglas demand system does not apply. Accordingly, the upper-level demand equations are in error. Furthermore, utility and equivalent variation are wrongly computed in simulations with non-standard settings for the CDE expansion parameters. Even with the standard settings, in multi-step simulations the utility and equivalent variation computations are inexact. The welfare decomposition inherits the defects of the equivalent variation computation. In removing these defects we revise in passing some minor misfeatures of the old treatment: Firstly, we treat the entire final demand system as the demand system of a representative household, rather than a conglomeration of representative and region-wide demand systems (subsection 2.6). Secondly, we provide a new facility for shifting the allocation of regional income exogenously by modifying rather than overriding the final demand system (subsection 2.14). Finally, we eliminate an uninterpretable \nuisance term" from the decomposition of equivalent variation (subsection 4.3).

Suggested Citation

  • McDougall, Robert, 2002. "A New Regional Household Demand System for GTAP," GTAP Technical Papers 942, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University.
  • Handle: RePEc:gta:techpp:942
    Note: GTAP Technical Paper No. 20
    as

    Download full text from publisher

    File URL: https://www.gtap.agecon.purdue.edu/resources/res_display.asp?RecordID=942
    Download Restriction: no

    Other versions of this item:

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:gta:techpp:942. 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: (Jeremy Douglas). General contact details of provider: http://edirc.repec.org/data/gtpurus.html .

    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.

    We have no references for this item. You can help adding them by using 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 RePEc Author Service 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.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.