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Functional Forms and Parametrization of CGE Models

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  • Nabil Annabi
  • John Cockburn
  • Bernard Decaluwé

Abstract

This study focused on the choice of functional forms and their parametrization (estimation of free parameters and calibration of other parameters) in the context of CGE models. Various types of elasticities are defined, followed by a presentation of the functional forms most commonly used in these models and various econometric methods for estimating their free parameters. Following this presentation of the theoretical framework, we review parameter estimates used in the literature. This brief literature review was carried out to be used as a guideline for the choice of parameters for CGE models of developing countries.

Suggested Citation

  • Nabil Annabi & John Cockburn & Bernard Decaluwé, 2006. "Functional Forms and Parametrization of CGE Models," Working Papers MPIA 2006-04, PEP-MPIA.
  • Handle: RePEc:lvl:mpiacr:2006-04
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    File URL: https://portal.pep-net.org/documents/download/id/13525
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    References listed on IDEAS

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    4. Devarajan, Shantayanan & Go, Delfin S. & Hongyi Li, 1999. "Quantifying the fiscal effects of trade reform," Policy Research Working Paper Series 2162, The World Bank.
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    7. Arndt, Channing & Robinson, Sherman & Tarp, Finn, 2002. "Parameter estimation for a computable general equilibrium model: a maximum entropy approach," Economic Modelling, Elsevier, vol. 19(3), pages 375-398, May.
    8. Shoven, John B & Whalley, John, 1984. "Applied General-Equilibrium Models of Taxation and International Trade: An Introduction and Survey," Journal of Economic Literature, American Economic Association, vol. 22(3), pages 1007-1051, September.
    9. Kapuscinski, Cezary A. & Warr, Peter G., 1999. "Estimation of Armington elasticities: an application to the Philippines," Economic Modelling, Elsevier, vol. 16(2), pages 257-278, April.
    10. Perroni, Carlo & Rutherford, Thomas F, 1998. "A Comparison of the Performance of Flexible Functional Forms for Use in Applied General Equilibrium Modelling," Computational Economics, Springer;Society for Computational Economics, vol. 11(3), pages 245-263, June.
    11. Touhami Abdelkhalek & Jean-Marie Dufour, 1998. "Statistical Inference For Computable General Equilibrium Models, With Application To A Model Of The Moroccan Economy," The Review of Economics and Statistics, MIT Press, vol. 80(4), pages 520-534, November.
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    13. Howe, Howard, 1975. "Development of the extended linear expenditure system from simple saving assumptions," European Economic Review, Elsevier, vol. 6(3), pages 305-310, July.
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    Citations

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    Cited by:

    1. Nabil Annabi & Youssef Boudribila & Simon Harvey, 2013. "Labour supply and income distribution effects of the working income tax benefit: a general equilibrium microsimulation analysis," IZA Journal of Labor Policy, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 2(1), pages 1-33, December.
    2. Mabugu, Ramos & Chitiga, Margaret, 2009. "Is increased agricultural protection beneficial for South Africa?," Economic Modelling, Elsevier, vol. 26(1), pages 256-265, January.
    3. Margaret Chitiga & Ramos Mabugu & Hélène Maisonnave, 2016. "Analysing job creation effects of scaling up infrastructure spending in South Africa," Development Southern Africa, Taylor & Francis Journals, vol. 33(2), pages 186-202, March.
    4. Fofana, Ismaël & Corong, Erwin & Chatti, Rim & Bouazouni, Omar, 2012. "Taxation policy and gender employment in the Middle East and North Africa Region: A comparative analysis of Algeria, Egypt, Morocco, and Tunisia," IFPRI discussion papers 1227, International Food Policy Research Institute (IFPRI).
    5. Martín Cicowiez & Javier Alejo & Luciano Di Gresia & Sergio Olivieri & World Bank & Ana Pacheco, 2016. "Export Taxes, World Prices, and Poverty in Argentina: A Dynamic CGEMicrosimulation Analysis
      [model, Argentina. Classification-JEL: C68, D58, I38, E62]
      ," International Journal of Microsimulation, International Microsimulation Association, vol. 9(1), pages 24-54.
    6. Kebede, Sindu & Fekadu, Belay & Aredo, Dejene, 2011. "Trade Liberalization and Poverty: A Macro-Micro Analysis in Ethiopia," Proceedings of the German Development Economics Conference, Berlin 2011 44, Verein für Socialpolitik, Research Committee Development Economics.
    7. Lofgren, Hans, 2012. "World food prices and human development: Policy simulations for archetype low-income countries," Policy Research Working Paper Series 6033, The World Bank.
    8. repec:eee:touman:v:51:y:2015:i:c:p:157-173 is not listed on IDEAS
    9. Serino, L.A., 2009. "Positive natural resource shocks and domestic adjustments in a semi-industrialized economy: Argentina in the 2004-2007 period," ISS Working Papers - General Series 18709, International Institute of Social Studies of Erasmus University Rotterdam (ISS), The Hague.
    10. Jussila, Mira & Tamminen, Saara & Kinnunen, Jouko, 2012. "The estimation of LES demand elasticities for CGE models," Working Papers 39, VATT Institute for Economic Research.
    11. Renato Vargas & Pamela Escobar & Maynor Cabrera & Javier Cabrera & Violeta Hernández & Vivian Guzmán & Martin Cicowiez, 2017. "Climate risk and food security in Guatemala," Working Papers MPIA 2017-01, PEP-MPIA.
    12. repec:gta:jnlgea:v:2:y:2017:i:1:p:166-214 is not listed on IDEAS
    13. Paul E. Brockway & Matthew K. Heun & João Santos & John R. Barrett, 2017. "Energy-Extended CES Aggregate Production: Current Aspects of Their Specification and Econometric Estimation," Energies, MDPI, Open Access Journal, vol. 10(2), pages 1-23, February.
    14. Osman, Rehab Osman Mohamed, 2012. "The EU Economic Partnership Agreements with Southern Africa: a computable general equilibrium analysis," Economics PhD Theses 0412, Department of Economics, University of Sussex.
    15. Margaret Chitiga & Bernard Decaluwe & Ramos Mabugu & Helene Maisonnave & Veronique Robichaud & Debra Shepherd & Servaas van der Berg & Dieter von Fintel, 2010. "The impact of the international economic crisis on child poverty in South Africa," Working Papers 201015, University of Pretoria, Department of Economics.
    16. Banerjee, Onil & Alavalapati, Janaki, 2009. "A computable general equilibrium analysis of forest concessions in Brazil," Forest Policy and Economics, Elsevier, vol. 11(4), pages 244-252, July.
    17. Wabenga Yango, James, 2011. "La CEPGL et l'économie de la R.D.Congo: Une analyse en équilibre général calculable
      [The ECGL and the DR, CONGO economy: a computable general equilibrium analysis]
      ," MPRA Paper 65172, University Library of Munich, Germany, revised Jan 2014.
    18. Hans Lofgren & Martin Cicowiez, 2018. "Linking Armington and CET Elasticities of Substitution and Transformation to Price Elasticities of Import Demand and Export Supply: A Note for CGE Practitioners," CEDLAS, Working Papers 0222, CEDLAS, Universidad Nacional de La Plata.
    19. Chitiga, Margaret & Fofana, Ismael & Mabugu, Ramos, 2011. "A multiregion general equilibrium analysis of fiscal consolidation in South Africa:," IFPRI discussion papers 1110, International Food Policy Research Institute (IFPRI).
    20. Laura Atuesta & Geoffrey J.D. Hewings, 2013. "Economic Welfare Analysis Of The Legalization Of Drugs: A Cge Microsimulation Model For Colombia," Economic Systems Research, Taylor & Francis Journals, vol. 25(2), pages 190-211, March.
    21. repec:wsi:ccexxx:v:06:y:2015:i:01:n:s2010007815500037 is not listed on IDEAS
    22. Banerjee, Onil & Cicowiez, Martin & Gachot, Sébastien, 2015. "A quantitative framework for assessing public investment in tourism – An application to Haiti," Tourism Management, Elsevier, vol. 51(C), pages 157-173.

    More about this item

    Keywords

    Trade liberalization; Poverty; Elasticities; Functional forms; Calibration; Computable General Equilibrium (CGE)Model;

    JEL classification:

    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • C81 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Methodology for Collecting, Estimating, and Organizing Microeconomic Data; Data Access
    • C82 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Methodology for Collecting, Estimating, and Organizing Macroeconomic Data; Data Access
    • D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
    • E27 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Forecasting and Simulation: Models and Applications

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