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A New Regional Household Demand System for GTAP

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  • 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
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    File URL: https://www.gtap.agecon.purdue.edu/resources/res_display.asp?RecordID=942
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    1. Philip D. Adams & Karen M. Huff & Robert McDougall & K.R. Pearson & Alan A. Powell, 1996. "Medium- and Long-run Consequences for Australia of an APEC Free Trade Area: CGE Analyses using the GTAP and MONASH Models," Centre of Policy Studies/IMPACT Centre Working Papers g-111, Victoria University, Centre of Policy Studies/IMPACT Centre.
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    Cited by:

    1. Hertel, Thomas, 2013. "Global Applied General Equilibrium Analysis Using the Global Trade Analysis Project Framework," Handbook of Computable General Equilibrium Modeling, Elsevier.
    2. Wei Bin Zhang, 2008. "A multi-region economic growth model with migration, housing and regional amenity," Analele Stiintifice ale Universitatii "Alexandru Ioan Cuza" din Iasi - Stiinte Economice, Alexandru Ioan Cuza University, Faculty of Economics and Business Administration, vol. 55, pages 322-350, November.
    3. Hertel, Thomas & Hummels, David & Ivanic, Maros & Keeney, Roman, 2007. "How confident can we be of CGE-based assessments of Free Trade Agreements?," Economic Modelling, Elsevier, vol. 24(4), pages 611-635, July.
    4. Birur, Dileep K. & Beach, Robert H., 2011. "Analyzing Trade Implications Of U.S. Biofuels Policies In A General Equilibrium Framework," 2011 Annual Meeting, July 24-26, 2011, Pittsburgh, Pennsylvania 103996, Agricultural and Applied Economics Association.
    5. Narayanan, Badri G. & Hertel, Thomas W. & Horridge, J. Mark, 2010. "Disaggregated data and trade policy analysis: The value of linking partial and general equilibrium models," Economic Modelling, Elsevier, vol. 27(3), pages 755-766, May.
    6. Naohiko Yahaba, 2010. "How does a decrease in oil production affect the world's economy?," Energy Working Papers 22722, East Asian Bureau of Economic Research.
    7. Kowal, Paweł, 2006. "On nesting nonhomothetic preferences," MPRA Paper 931, University Library of Munich, Germany.
    8. Ken Itakura, . "Calibrating the Mix of Electric Power Generation Types," Chapters, Economic Research Institute for ASEAN and East Asia (ERIA).
    9. Narayanan, Badri & Thomas Hertel & Mark Horridge, 2010. "Linking Partial and General Equilibrium Models: A GTAP Application Using TASTE," GTAP Technical Papers 3192, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University.
    10. Michael KOHLHAAS & Martin CAMES & Jochen DIEKMANN & Dieter SCHUMACHER & Katja SCHUMACHER, "undated". "Economic, Environmental and International Trade Effects of the EU Directive on Energy Tax Harmonization," EcoMod2004 330600079, EcoMod.
    11. Ken Itakura, 2011. "The Economic Consequences of Shifting Away From Nuclear Energy," Working Papers PB-2011-04, Economic Research Institute for ASEAN and East Asia (ERIA).
    12. G Philippidis & L J Hubbard, 2003. "Agenda 2000 Reform of the CAP and its Impacts on Member Member States: A Note," Journal of Agricultural Economics, Wiley Blackwell, vol. 54(3), pages 479-486.
    13. Carrico, Caitlyn & Tsigas, Marinos, 2014. "Enriching U.S. labor results in a multi-regional CGE model," Economic Modelling, Elsevier, vol. 36(C), pages 268-281.
    14. Xiao-guang Zhang & George Verikios, 2007. "Providing Duty-Free Access to Australian Markets for Least-Developed Countries: A General Equilibrium Analysis," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 40(3), pages 239-252, September.
    15. Oyewumi, Olubukola Ayodeju & Jooste, Andre & Britz, Wolfgang & van Schalkwyk, Herman D., 2007. "Tariff and Tariff Rate Quota Liberalization in the South African Livestock Industry: Approaches to Welfare Measurement," Agrekon, Agricultural Economics Association of South Africa (AEASA), vol. 46(1), March.
    16. Philippidis, George & Hubbard, Lionel J. & Renwick, Alan W., 2006. "A CGE Analysis of the Harbinson Proposal: Outcomes for the EU25," Working Papers 45992, Scottish Agricultural College, Land Economy Research Group.
    17. Richard Tol & Stefano F Verde, 2013. "Fiscal limits on first-best climate policy: A CGE analysis for Europe," Working Paper Series 5813, Department of Economics, University of Sussex.
    18. Jan Hagemejer & Jan Michałek & Tomasz Michałek, 2010. "Implications of the Doha Round negotiations in services for Poland," Bank i Kredyt, Narodowy Bank Polski, vol. 41(1), pages 5-30.
    19. Parrado, Ramiro & De Cian, Enrica, 2014. "Technology spillovers embodied in international trade: Intertemporal, regional and sectoral effects in a global CGE framework," Energy Economics, Elsevier, vol. 41(C), pages 76-89.
    20. Joseph Francois & Miriam Manchin & Hanna Norberg & Olga Pindyuk & Patrick Tomberger, 2013. "Reducing Transatlantic Barriers to Trade and Investment: An Economic Assessment," Economics working papers 2015-03, Department of Economics, Johannes Kepler University Linz, Austria.
    21. Naohiko Yahaba, 2010. "How Does A Decrease In Oil Production Affect The World Economy?," Asia Pacific Economic Papers 388, Australia-Japan Research Centre, Crawford School of Public Policy, The Australian National University.
    22. Ricardo Arguello, 2004. "An exporatory assessment of the potential impact of the free trade area of the americas on the andean community," BORRADORES DE INVESTIGACIÓN 004332, UNIVERSIDAD DEL ROSARIO.
    23. Lips, Markus, 2005. "Sufficient nourishment worldwide via transfer payments," Food Policy, Elsevier, vol. 30(1), pages 81-96, February.

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