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Sequential Linking of Computable General Equilibrium and Microsimulation Models

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  • Nicolas Hérault

    (Melbourne Institute of Applied Economic and Social Research, The University of Melbourne)

Abstract

Several approaches have recently been developed to combine a computable general equilibrium model (CGE) and a microsimulation (MS) model. These so-called CGE-MS models enjoy a growing interest because they build a bridge between macro- and microeconomic analyses. This paper focuses on the ‘top-down' approach. In this context, the CGE model is used to simulate the changes at the macroeconomic level after the policy change, which are then passed on to the MS model. The aim of this paper is to compare the ‘top-down' approach introduced by Robilliard et al. (2001) based on a behavioural MS model with an alternative and simpler approach making use of a non-behavioural MS model in combination with a reweighting procedure. Both approaches are presented and then applied to the case of trade liberalisation in South Africa. The reweighting approach introduces a small bias in the results, however without modifying the main conclusions. Given its relative simplicity compared to the behavioural approach, the reweighting approach seems to constitute a good alternative when data or time constraints do not allow the use of the behavioural approach and when the interest does not lie in the production of individual-level transition matrices.

Suggested Citation

  • Nicolas Hérault, 2009. "Sequential Linking of Computable General Equilibrium and Microsimulation Models," Melbourne Institute Working Paper Series wp2009n02, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
    • Handle: RePEc:iae:iaewps:wp2009n02
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    File URL: http://melbourneinstitute.unimelb.edu.au/downloads/working_paper_series/wp2009n02.pdf
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    References listed on IDEAS

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    Cited by:

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    2. Hielke BUDDELMEYER & Nicolas HÉRAULT & Guyonne KALB & Mark VAN ZIJLL DE JONG, 2009. "Linking a Dynamic CGE Model and a Microsimulation Model: Climate Change Mitigation Policies and Income Distribution in Australia," EcoMod2009 21500020, EcoMod.

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