Parameterization of applied general equilibrium models with flexible trade specifications based on the Armington, Krugman, and Melitz models
This paper explains how the Armington-Krugman-Melitz supermodel developed by Dixon and Rimmer can be parameterized, and demonstrates that only two kinds of additional information are required in order to extend a standard trade model to include Melitz-type monopolistic competition and heterogeneous firms. Further, it is shown how specifying too much additional information leads to violations of the model constraints, necessitating adjustment and reconciliation of the data. Once a Melitz-type model is parameterized, a Krugman-type model can also be parameterized using the calibrated values in the Melitz-type model without any additional data. Sample code for the General Algebraic Modeling System (GAMS) has also been prepared to promote the innovative supermodel in the AGE community.
|Date of creation:||Jan 2013|
|Date of revision:|
|Publication status:||Published in IDE Discussion Paper. No. 380. 2013.1|
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- Russell H. Hillberry & Edward J. Balistreri & Thomas F. Rutherford, 2007.
"Structural Estimation and Solution of International Trade Models with Heterogeneous Firms,"
DEGIT Conference Papers
c012_038, DEGIT, Dynamics, Economic Growth, and International Trade.
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- Edward J. Balistreri & Russell H. Hillberry & Thomas F. Rutherford, 2008. "Structural Estimation and Solution of International Trade Models with Heterogeneous Firms," Department of Economics - Working Papers Series 1056, The University of Melbourne.
- Roberto Roson, 2006.
"Introducing Imperfect Competition in CGE Models: Technical Aspects and Implications,"
Society for Computational Economics, vol. 28(1), pages 29-49, August.
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- Roberto Roson, 2006. "Introducing Imperfect Competition in CGE Models: Technical Aspects and Implications," Working Papers 2006.3, Fondazione Eni Enrico Mattei.
- Krugman, Paul, 1980. "Scale Economies, Product Differentiation, and the Pattern of Trade," American Economic Review, American Economic Association, vol. 70(5), pages 950-59, December.
- Zhai, Fan, 2008. "Armington Meets Melitz: Introducing Firm Heterogeneity in a Global CGE Model of Trade," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 23, pages 575-604.
- Balistreri, Edward J. & Rutherford, Thomas F., 2013. "Computing General Equilibrium Theories of Monopolistic Competition and Heterogeneous Firms," Handbook of Computable General Equilibrium Modeling, Elsevier.
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