New Economics Papers
on Computational Economics
Issue of 2007‒03‒24
seven papers chosen by

  1. Using simple neural networks to analyse firm activity. By Michael Dietrich
  2. A Multi-Agent Congestion and Pricing Model By Xi Zou; David Levinson
  3. Using a finite horizon numerical optimisation method for a periodic optimal control problem By Azzato, Jeffrey; Krawczyk, Jacek
  4. Poverty-reducing or Poverty-inducing? A CGE-based Analysis of Foreign Capital Inflows in Pakistan By Siddiqui, Rizwana; Kemal, A R
  5. THE ECONOMIC IMPACT OF RESTRICTED WATER SUPPLY: A COMPUTABLE GENERAL EQUILIBRIUM ANALYSIS By Maria Berrittella; Katrin Rehdanz; Arjen Y. Hoekstra; Roberto Roson; Richard S.J. Tol
  6. TRIPLE DIVIDENDS OF WATER CONSUMPTION CHARGES IN SOUTH AFRICA By Anthony Letsoalo; James Blignaut; Theuns de Wet; Martin de Wit; Sebastiaan Hess; Richard S.J. Tol; Jan van Heerden

  1. By: Michael Dietrich (Department of Economics, The University of Sheffield)
    Abstract: IntroductionCharacteristically, in economics, the analysis of firm activity is based on a production function that defines a deterministic relationship between factor inputs and firm output. The analysis of the firm as an organisation takes a somewhat different approach. For instance, behavioural economics (for example Simon, 1955; March and Simon, 1958; Cyert and March, 1963), transaction cost theory (Williamson, 1975, 1985) and capabilities approaches (for example Foss and Loasby, 1998; Foss, 2005) emphasise that economic agents have inevitably incomplete information and knowledge and are at most boundedly or limitedly rational. The implication here is that while general principles governing intra-firm interaction can be specified, detailed organisational processes inside the firm are, for practical academic purposes, effectively unobservable. Hence, the usual analytical tools designed to analyse firm behaviour, based on production functions and optimising principles with full information, are in practice an oversimplification of firm activity (Loasby, 1999).
    Date: 2005–07
  2. By: Xi Zou; David Levinson (Nexus (Networks, Economics, and Urban Systems) Research Group, Department of Civil Engineering, University of Minnesota)
    Abstract: A multi-agent model of travelers competing to utilize a roadway in time and space is presented in this paper to illustrate the effect of congestion and pricing on traveler behaviors and network equilibrium. To realize the spillover effect among travelers, N-player games are constructed in which the strategy set include (N+1) strategies. We solve the discrete N-player game (for N less than 8) and find Nash equilibria if they exist. This model is compared to the bottleneck model. The results of numerical simulation show that the two models yield identical results in terms of lowest total costs and marginal costs when a social optimum exists.
    Keywords: Agent-based Model, Game Theory, Congestion, Queueing, Traffic Flow, Congestion Pricing, Road Pricing, Value Pricing
    JEL: R41 R42 R48 D10 D81 D83 C72
    Date: 2006
  3. By: Azzato, Jeffrey; Krawczyk, Jacek
    Abstract: Computing a numerical solution to a periodic optimal control problem is difficult. A method of approximating a solution to a given (stochastic) optimal control problem using Markov chains was developed in [3]. This paper describes an attempt at applying this method to a periodic optimal control problem introduced in [2].
    Keywords: Computational techniques; Economic software; Computational methods in stochastic optimal control; Computational economics; Approximating Markov decision chains
    JEL: C63 C87
    Date: 2007–02–11
  4. By: Siddiqui, Rizwana; Kemal, A R
    Abstract: Foreign capital inflows (FKI) help an economy by financing the imbalance between income and expenditure. However, their impact on poverty in the recipient economy is a controversial issue. In this study, we examine the impact on poverty in two different scenarios: (1) labour is homogeneous; (2) labour is heterogeneous. The Computable General Equilibrium model for Pakistan is used to conduct simulations in order to assess the impact of an increase in foreign capital on poverty both in the presence and in the absence of trade liberalisation. Several interesting results emerge from the study. First, FKI tends to reduce poverty in the presence as well as in the absence of trade liberalisation when labour is homogeneous. However, poverty reduction appears to be larger in the presence of trade liberalisation. Second, when labour is differentiated according to qualification and is assumed to be sector-specific, in the absence of trade liberalisation a higher proportion of benefits of FKI accrue to skilled labour and poverty increases by all measures for both urban and rural households. In the presence of trade liberalisation, FKI benefits unskilled labour more, and poverty is decreased irrespective of the choice of poverty indicators.
    Keywords: Capital inflow; Poverty; Pakistan
    JEL: F32
    Date: 2006
  5. By: Maria Berrittella; Katrin Rehdanz; Arjen Y. Hoekstra; Roberto Roson; Richard S.J. Tol (Economic and Social Research Institute, Dublin)
    Abstract: Water problems are typically studied at the level of the river catchment. About 70% of all water is used for agriculture, and agricultural products are traded internationally. A full understanding of water use is impossible without understanding the international market for food and related products, such as textiles. The water embedded in commodities is called virtual water. Based on a general equilibrium model, we offer a method for investigating the role of water resources and water scarcity in the context of international trade. We run five alternative scenarios, analysing the effects of water scarcity due to reduced availability of groundwater. This can be a consequence of physical constraints, and of policies curbing water demand. Four scenarios are based on a “market solution”, where water owners can capitalize their water rent or taxes are recycled. In the fifth “non-market” scenario, this is not the case; supply restrictions imply productivity losses. Restrictions in water supply would shift trade patterns of agriculture and virtual water. These shifts are larger if the restriction is larger, and if the use of water in production is more rigid. Welfare losses are substantially larger in the non-market situation. Water-constrained agricultural producers lose, but unconstrained agricultural produces gain; industry gains as well. As a result, there are regional winners and losers from water supply constraints. Because of the current distortions of agricultural markets, water supply constraints could improve allocative efficiency; this welfare gain may more than offset the welfare losses due to the resource constraint.
    Keywords: Computable General Equilibrium, Sustainable Water Supply, Virtual Water, Water Scarcity
    JEL: D58 Q25 Q28
    Date: 2006–01
  6. By: Anthony Letsoalo; James Blignaut; Theuns de Wet; Martin de Wit; Sebastiaan Hess; Richard S.J. Tol (Economic and Social Research Institute, Dublin); Jan van Heerden
    Abstract: The South African government is exploring ways to address water scarcity problems by introducing a water resource management charge on the quantity of water used in sectors such as irrigated agriculture, mining and forestry. It is expected that a more efficient water allocation, lower use and a positive impact on poverty can be achieved. This paper reports on the validity of these claims by applying a computable general equilibrium model to analyse the triple dividend of water consumption charges in South Africa: reduced water use, more rapid economic growth, and a more equal income distribution. It is shown that the appropriate, budget-neutral combination of water charges, particularly on irrigated agriculture and coal mining, and reduced indirect taxes, particularly on food, would yield triple dividends.
    Keywords: water scarcity, water charges, triple dividend, poverty alleviation, computable general equilibrium model
    JEL: O13 Q25
    Date: 2005–04
  7. By: Maria Berrittella; Katrin Rehdanz; Roberto Roson; Richard S.J. Tol (Economic and Social Research Institute, Dublin)
    Abstract: Water is scarce in many countries. One instrument to improve the allocation of a scarce resource is (efficient) pricing or taxation. However, water is implicitly traded on international markets, particularly through food and textiles, so that impacts of water taxes cannot be studied in isolation, but require an analysis of international trade implications. We include water as a production factor in a multi-region, multi-sector computable general equilibrium model (GTAP), to assess a series of water tax policies. We find that water taxes reduce water use, and lead to shifts in production, consumption, and international trade patterns. Countries that do not levy water taxes are nonetheless affected by other countries’ taxes. Taxes on agricultural water use drive most of the economic and welfare impacts. Reductions in water use (welfare losses) are less (more) than linear in the price of water. The results are sensitive to the assumed ability to substitute other production factors for water. A water tax on production would have different effects on water use, production and trade patterns, and the size and distribution of welfare losses than would a water tax on final consumption.
    Keywords: Computable General Equilibrium, Virtual Water, Water Allocation, Water Pricing, Water Scarcity
    JEL: D58 Q25 Q28
    Date: 2006–01

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