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Building and Linking a Microsimulation Model to a CGE Model : the South African Microsimulation Model

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  • Nicolas Hérault

    () (GED, Université Montesquieu-Bordeaux IV)

Abstract

This paper describes the project of building a micro-macro model for South Africa. The aim is to deal with the links between globalisation and poverty or inequality, explaining the effects of trade liberalisation on poverty and inequality. The main issue of interest is the effect of international trade on households (especially their income); some changes may contribute to reduce poverty while other changes could work against the poor. The approach presented in this paper relies on combining a macro-oriented CGE model and a microsimulation model. Combining these two models the microeconomic effects (on poverty and inequality) of a macroeconomic policy (trade liberalisation) can be analysed. The paper gives details about the microsimulation model and the "top-down" approach used to link the microsimulation model and the CGE model. In addition, the methodology discussed is applied to South African data and a selection of preliminary results using this approach are presented and discussed. The main concern regarding poor households is whether the decrease in real (or nominal) earnings for formal low-skilled and skilled workers is offset by the upward trend in formal employment levels. This appears to be the case implying a decrease in poverty due to trade liberalisation. Although whites emerge as the main winners, the increase in inter-group inequality is more than compensated by the decrease in intra-group inequality. Ce papier décrit le projet d’élaboration d’un modèle micro-macro pour l'Afrique du Sud. L’objectif est d’examiner les liens entre la mondialisation et la pauvreté ou l'inégalité, en expliquant les effets de la libéralisation commerciale sur ces deux indicateurs de progrès social. La préoccupation principale concerne l'effet du commerce international sur les ménages (particulièrement, leur revenu), certains changements pouvant contribuer à réduire la pauvreté, tandis que d'autres étant susceptibles d’aggraver les privations. L'approche présentée dans cet article est fondée sue la combinaison d’un modèle CGE orienté-macro et d’un modèle de micro-simulation. En combinant ces deux modèles, les effets micro-économiques (sur la pauvreté et l'inégalité) d'une politique macro-économique (libéralisation commerciale) peuvent être analysés. L’étude spécifie le modèle de micro-simulation et l'approche « top-down », employés pour relier les modèles de micro-simulation et CGE.En outre, la méthodologie discutée est appliquée aux données sud-africaines, et des résultats préliminaires, fondés sur cette approche, sont présentés et discutés. Un élément central de l’analyse concernant les ménages pauvres est d’examiner si la diminution des revenus réels (ou nominaux) des ouvriers qualifiés ou faiblement qualifiés du secteur formel est compensée par la tendance à la hausse de l’emploi formel. L’étude montre que cela semble être le cas, ce qui implique une diminution de la pauvreté due à la libéralisation commerciale. Bien que les bénéficiaires principaux soient les « blancs », l'augmentation de l'inégalité inter-groupes est plus que compensée par la diminution de l'inégalité intra-groupes. (Full text in english)

Suggested Citation

  • Nicolas Hérault, 2005. "Building and Linking a Microsimulation Model to a CGE Model : the South African Microsimulation Model," Documents de travail 114, Groupe d'Economie du Développement de l'Université Montesquieu Bordeaux IV.
  • Handle: RePEc:mon:ceddtr:114
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    File URL: http://ged.u-bordeaux4.fr/ceddt114.pdf
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    References listed on IDEAS

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    1. Mark Doms & Eric J. Bartelsman, 2000. "Understanding Productivity: Lessons from Longitudinal Microdata," Journal of Economic Literature, American Economic Association, vol. 38(3), pages 569-594, September.
    2. François Combarnous & Pascal Labazée, 2002. "Entreprises et emploi en Côte d'Ivoire," Série de recherche 05, Groupe d'Economie du Développement de l'Université Montesquieu Bordeaux IV.
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    Cited by:

    1. Ahmed, Vaqar & O' Donoghue, Cathal, 2007. "CGE-Microsimulation Modelling: A Survey," MPRA Paper 9307, University Library of Munich, Germany.

    More about this item

    JEL classification:

    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • E17 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Forecasting and Simulation: Models and Applications
    • O55 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Africa

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