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Comparing the Economic Impact of an Export Shock in Two Modeling Frameworks

Author

Listed:
  • Andrew J. Cassey
  • David W. Holland
  • Abdul Razack

    (School of Economic Sciences, Washington State University)

Abstract

Because of more restrictive assumptions on regional input-output (IO) models compared to computable general equilibrium (CGE) models, the literature agrees IO results are intuitively consistent with long run equilibrium but otherwise overestimated. We compare the results of IO and CGE models from an exogenous export shock under various labor market constraints and capital closures. Consistent with the literature, we find the IO model's results do not match those of the CGE models. But contrary to conventional wisdom, the positive secondary impacts are larger with the CGE models than with the IO model. Furthermore, we find the closest match between direct effects is when the CGE model has short run restrictions. Our finding means that the common view of CGE model results being both lower in estimate and more accurate in the short run than IO models does not universally hold. Thus researchers’ choice of models and interpretation of results need to be more nuanced and cautious than previously thought.

Suggested Citation

  • Andrew J. Cassey & David W. Holland & Abdul Razack, 2010. "Comparing the Economic Impact of an Export Shock in Two Modeling Frameworks," Working Papers 2010-12, School of Economic Sciences, Washington State University.
    • Handle: RePEc:wsu:wpaper:cassey-4
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    File URL: http://faculty.ses.wsu.edu/WorkingPapers/Cassey/WP2010-12.pdf
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    Cited by:

    1. Hussain, Anwar & Munn, Ian A. & Holland, David W. & Armstrong, James B. & Spurlock, Stan R., 2012. "Economic Impact of Wildlife-Associated Recreation Expenditures in the Southeast United States: A General Equilibrium Analysis," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 44(1), pages 63-82, February.
    2. Laurent Scaringella & Jean-Jacques Chanaron, 2016. "Grenoble–GIANT Territorial Innovation Models," Post-Print hal-01472878, HAL.
    3. Logar, Ivana & van den Bergh, Jeroen C.J.M., 2013. "The impact of peak oil on tourism in Spain: An input–output analysis of price, demand and economy-wide effects," Energy, Elsevier, vol. 54(C), pages 155-166.
    4. Dudensing, Rebekka & Guerrero, Bridget & Amosson, Steve, 2019. "Evaluating the Accuracy of Regional Economic Impact Estimates: Considering a 2013 Beef Plant Closure in Texas," Journal of Regional Analysis and Policy, Mid-Continent Regional Science Association, vol. 49(01), May.
    5. repec:zna:indecs:v:13:y:2015:i:2:p:434-449 is not listed on IDEAS
    6. Cassey, Andrew J. & Galinato, Suzette P. & Taylor, Justin L., 2012. "Environmental Regulation and Regional Economy: Economic Impacts of the Elimination of Azinphos-methyl on the Apple Industry and Washington State," Journal of Food Distribution Research, Food Distribution Research Society, vol. 43(2), pages 1-22.
    7. Andrew J. Cassey, 2011. "State Foreign Export Patterns," Southern Economic Journal, John Wiley & Sons, vol. 78(2), pages 308-329, October.
    8. Xi He, 2020. "US agricultural exports and labor market adjustments," Agricultural Economics, International Association of Agricultural Economists, vol. 51(4), pages 609-621, July.
    9. Helena Miloloza, 2015. "Distance Factors and Croatian Export Obstacles in the EU15: CAGE Approach," Interdisciplinary Description of Complex Systems - scientific journal, Croatian Interdisciplinary Society Provider Homepage: http://indecs.eu, vol. 13(3), pages 434-449.
    10. Scaringella, Laurent & Chanaron, Jean-Jacques, 2016. "Grenoble–GIANT Territorial Innovation Models: Are investments in research infrastructures worthwhile?," Technological Forecasting and Social Change, Elsevier, vol. 112(C), pages 92-101.
    11. Miloloža Helena, 2015. "Differences between Croatia and EU Candidate Countries: the CAGE Distance Framework," Business Systems Research, Sciendo, vol. 6(2), pages 52-62, September.
    12. Laurent Scaringella & Jean-Jacques Chanaron, 2016. "Grenoble–GIANT Territorial Innovation Models," Grenoble Ecole de Management (Post-Print) hal-01472878, HAL.
    13. Watson, Philip S. & Castelin, Kimberly & Salant, Priscilla & Wulfhorst, J.D., 2012. "Estimating the Impacts of a Reduction in the Foreign-born Labor Supply on a State Economy: A Nested CGE Analysis of the Idaho Economy," The Review of Regional Studies, Southern Regional Science Association, vol. 42(1), pages 51-74, Spring.

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    Keywords

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    JEL classification:

    • C67 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Input-Output Models
    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • R13 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General Equilibrium and Welfare Economic Analysis of Regional Economies
    • R15 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Econometric and Input-Output Models; Other Methods

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