New Economics Papers
on Computational Economics
Issue of 2007‒01‒23
ten papers chosen by

  1. Artificiality in Social Sciences By Rennard, Jean-Philippe
  2. A minimal noise trader model with realistic time series properties By Alfarano, Simone; Lux, Thomas
  3. Box-constrained vector optimization: a steepest descent method without “a priori” scalarization By Miglierina Enrico; Molho Elena; Recchioni Maria Cristina
  4. Turkish EU Membership: A Simulation Study on Economic Effects By Pekka Sulamaa; Mika Widgrén
  5. A Policy Impact Evaluation Model For Scotland: Decoupling Single Farm Payments By Gelan, Ayele; Schwarz, Gerald
  6. Documentation FiFoSiM : integrated tax benefit microsimulation and CGE model By Peichl, Andreas; Schaefer, Thilo
  7. Economy-Wide Estimates of the Implications of Climate Change: A Joint Analysis for Sea Level Rise and Tourism By Francesco Bosello; Andrea Bigano; Roberto Roson; Richard S.J. Tol
  8. The Economic Impact of the South-North Water Transfer Project in China: A Computable General Equilibrium Analysis By Maria Berrittella; Katrin Rehdanz; Richard S.J. Tol
  9. Trade in Business Services in General Equilibrium By James R. Markusen
  10. Marginal Cost Versus Average Cost Pricing with Climatic Shocks in Senegal: A Dynamic Computable General Equilibrium Model Applied to Water By Anne Briand

  1. By: Rennard, Jean-Philippe
    Abstract: This text provides with an introduction to the modern approach of artificiality and simulation in social sciences. It presents the relationship between complexity and artificiality, before introducing the field of artificial societies which greatly benefited from the computer power fast increase, gifting social sciences with formalization and experimentation tools previously owned by "hard" sciences alone. It shows that as "a new way of doing social sciences", artificial societies should undoubtedly contribute to a renewed approach in the study of sociality and should play a significant part in the elaboration of original theories of social phenomena.
    Keywords: artificial societies; multi-agent systems; distributed artificial intelligence; complexity
    JEL: C63
    Date: 2006
  2. By: Alfarano, Simone; Lux, Thomas
    Abstract: Simulations of agent-based models have shown that the stylized facts (unit-root, fat tails and volatility clustering) of financial markets have a possible explanation in the interactions among agents. However, the complexity, originating from the presence of non-linearity and interactions, often limits the analytical approach to the dynamics of these models. In this paper we show that even a very simple model of a financial market with heterogeneous interacting agents is capable of reproducing realistic statistical properties of returns, in close quantitative accordance with the empirical analysis. The simplicity of the system also permits some analytical insights using concepts from statistical mechanics and physics. In our model, the traders are divided into two groups : fundamentalists and chartists, and their interactions are based on a variant of the herding mechanism introduced by Kirman [22]. The statistical analysis of our simulated data shows long-term dependence in the auto-correlations of squared and absolute returns and hyperbolic decay in the tail of the distribution of the raw returns, both with estimated decay parameters in the same range like empirical data. Theoretical analysis, however, excludes the possibility of ’true’ scaling behavior because of the Markovian nature of the underlying process and the finite set of possible realized returns. The model, therefore, only mimics power law behavior. Similarly as with the phenomenological volatility models analyzed in LeBaron [25], the usual statistical tests are not able to distinguish between true or pseudo-scaling laws in the dynamics of our artificial market.
    Keywords: Herd Behavior, Speculative Dynamics, Fat Tails, Volatility Clustering
    JEL: C61 G12
    Date: 2006
  3. By: Miglierina Enrico (Department of Economics, University of Insubria, Italy); Molho Elena (Department of Management Sciences, University of Pavia); Recchioni Maria Cristina (Dipartimento di Scienze Sociali “D. Serrani”, Università Politecnica delle Marche, Ancona)
    Abstract: In this paper a notion of descent direction for a vector function defined on a box is introduced. This concept is based on an appropriate convex combination of the “projected” gradients of the components of the objective functions. The proposed approach does not involve an “apriori” scalarization since the coefficients of the convex combination of the projected gradients are the solutions of a suitable minimization problem depending on the feasible point considered. Subsequently, the descent directions are considered in the formulation of a first order optimality condition for Pareto optimality in a box-constrained multiobjective optimization problem. Moreover, a computational method is proposed to solve box-constrained multiobjective optimization problems. This method determines the critical points of the box constrained multiobjective optimization problem following the trajectories defined through the descent directions mentioned above. The convergence of the method to the critical points is proved. The numerical experience shows that the computational method efficiently determines the whole local Pareto front.
    Keywords: Multi-objective optimization problems, path following methods, dynamical systems, minimal selection.
    Date: 2006–02
  4. By: Pekka Sulamaa; Mika Widgrén
    Abstract: This paper evaluates the economic effects of Turkish EU membership. The evaluation is based on the widely utilized computable general equilibrium called model GTAP (Global Trade Analysis Project). Imperfect competition is modelled by existence of scale economies on non agricultural sectors. The latest GTAP database version (base year 2001) is aggregated into seven regions: Turkey, Germany-Austria, North EU, South EU, Balkan countries, NAFTA, ASIA and Rest of World. We analyse economic effects of abolishing trade barriers between the EU25 and Turkey and applying common external tax on Turkey. Turkish EU membership is clearly beneficial for Turkey and it does not seem to have significant negative impact for the rest of the world. If we take scale economies into account the aggregate effects are larger than in perfect competition case.
    Keywords: Turkey, EU, CGE, international trade
    Date: 2007–01–12
  5. By: Gelan, Ayele; Schwarz, Gerald
    Abstract: The purpose of this paper is to assess the impacts of decoupling single farm payments in Scotland. It focuses on aggregate impacts on the agricultural products in domestic and external markets and the spill-over effect of this on the non-agricultural sector as well as an aggregate impact on the Scottish GDP. In order to capture system-wide impacts of the policy reform, a CGE model was formulated and implemented using a social accounting matrix constructed for Scotland. The simulation results suggest that the Scottish agricultural sector may encounter declines in output and factor us as a result of the policy reform. However, this critically depends on two factors: (a) the price effect of the policy reform on Scottish agricultural products relative to the EU average as well as the conditions of changes in world agricultural market prices; and (b) the extent to which customers would be sensitive to price effects of the policy reform. As far as the spill-over effect to the non-agricultural sector is concerned, decoupling of direct payments seems to have a positive spill-over effect. Similarly, the aggregate GDP effect is positive under all simulation scenarios. Critically, the simulation experiments indicate that policy shock may have a symmetrical outcome across the two sectors, with contractions in agriculture being accompanied by expansions in the non-agricultural sector, mainly because of factor market interactions between the two sectors.
    Keywords: Cap reform; single farm payments; spill-over effects; Scotland
    JEL: Q18 Q11 R00 Q10 H00
    Date: 2006
  6. By: Peichl, Andreas; Schaefer, Thilo
    Abstract: This documentation describes FiFoSiM, the integrated tax benefit microsimulation and CGE model of the Center of Public Economics at the University of Cologne. FiFoSiM consists of three main parts. The first part is a static tax benefit microsimulation module. The second part adds a behavioural component to the model: an econometricaly estimated labour supply model. The third module is a CGE model which allows the user of FiFoSiM to assess the global economic e¤ects of policy measures. Two specific features distinguish FiFoSiM from other tax benefit models. First, the simultaneous use of two databases for the tax benefit module and second, the linkage of the tax benefit model to a CGE model.
    Keywords: FiFoSiM, microsimulation, CGE
    JEL: D58 H2 J22
    Date: 2006
  7. By: Francesco Bosello (Fondazione Eni Enrico Mattei and Ca’Foscari University of Venice); Andrea Bigano (Fondazione Eni Enrico Mattei and REF, Ricerche per l'Economia e la Finanza); Roberto Roson (Fondazione Eni Enrico Mattei and Ca’Foscari University of Venice); Richard S.J. Tol (Vrije Universiteit)
    Abstract: Climate change impacts on human life have well defined and different origins, nevertheless in the determination of their final effects, especially those involving social-economic responses, interactions among impacts are likely to play an important role. This paper is one of the first attempts to disentangle and highlight the role of these interactions. It focuses on the economic assessment of two specific climate change impacts: sea-level rise and changes in tourism flows. By using a CGE model the two impacts categories are first analyzed separately and then jointly. Comparing the results it is shown that, even though qualitatively joint effects follow the outcomes of the disjoint exercises, quantitatively impact interactions do play a significant role. Moreover it has been also possible to disentangle the relative contribution of each single impact category to the final result. In the case under scrutiny demand shocks induced by changes in tourism flows outweigh the supply side shock induced by the loss of coastal land.
    Keywords: Climate Change, Sea Level Rise, Tourism, Computable General Equilibrium Models
    JEL: C68 D58 Q25
    Date: 2006–11
  8. By: Maria Berrittella (University of Palermo); Katrin Rehdanz (Hamburg University); Richard S.J. Tol (Economic and Social Research Institute)
    Abstract: Water resources are unevenly spread in China. Especially the basins of the Yellow, Hui and Hai rivers in the North are rather dry. To increase the supply of water in these basins, the South-to-North Water Transfer project (SNWT) was launched. Using a computable general equilibrium model this study estimates the impact of the project on the economy of China and the rest of the world. We contrast three alternative groups of scenarios. All are directly concerned with the South-to-North water transfer project to increase water supply. In the first group of scenarios additional supply implies productivity gains. We call it the “non-market” solution. The second group of scenarios is called “market solution”. The market price for water adjusts such that supply and demand are equated again. In the third group of simulations the economic implications of China’s capital investment in infrastructure for the water South-North water transfer project is analyzed. Finally, the investment is combined with the increased capacity of water. If an increase in water supply in China leads to an increase in productivity of their water-intensive goods and services (non-market solution) this would result in a huge positive welfare effect from increased production and export. The effect on China’s welfare would still be positive, if a market for water would exist (market solution), but the world as a whole would lose. The negative effect for the rest of the world is largely explained by a deterioration of its terms-of-trade. Well functioning water markets in China are unlikely to exist.
    Keywords: Computable General Equilibrium, South-North Water Transfer Project, Water Policy, Water Scarcity
    JEL: D58 R13 Q25 Q28
    Date: 2006–12
  9. By: James R. Markusen
    Abstract: Trade in business services has been attracting attention from academic researchers, policy makers, and business journalists. While there are many anecdotes, there has been little in the way of formal theory applied to this issue. In this paper, we adapt a general model of fragmentation of production activities to try to capture the specific features of business services. Following a general discussion, we calibrate a numerical general-equilibrium simulation model to a situation in which both trade and foreign investment in services are initially banned or technically infeasible. We then compute three counter-factual scenarios: one in which trade but in investment in services is feasible or allowed, one in which investment but not trade is allowed, and one in which both trade and investment in services is allowed.
    JEL: F0 F2 F23
    Date: 2007–01
  10. By: Anne Briand (University of Rouen)
    Abstract: The model simulates on a 20-year horizon, a first phase of increase in the water resource availability taking into account the supply policies by the Senegalese government and a second phase with hydrologic deficits due to demand evolution (demographic growth). The results show that marginal cost water pricing (with a subsidy ensuring the survival of the water production sector) makes it possible in the long term to absorb the shock of the resource shortage, GDP, investment and welfare increase. Unemployment drops and the sectors of rain rice, market gardening and drinking water distribution grow. In contrast, the current policy of average cost pricing of water leads the long-term economy in a recession with an agricultural production decrease, a strong degradation of welfare and a rise of unemployment. This result questions the basic tariff (average cost) on which block water pricing is based in Senegal.
    Keywords: Computable General Equilibrium Model, Dynamic, Imperfect Competition, Water, Pricing, Sub Saharan Africa
    JEL: C68 O13
    Date: 2006–11

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