New Economics Papers
on Computational Economics
Issue of 2007‒09‒09
eight papers chosen by

  1. Labor market policy evaluation with an agent-based model By Neugart, Michael
  2. Energy market liberalisation in the FSU - simulations with the GTAP model By Riipinen , Toni
  3. Searching for optimal integer solutions to set partitioning problems using column generation By Bredström, David; Jörnsten, Kurt; Rönnqvist, Mikael
  4. The Post-Crisis Sequencing of Economic Integration in Asia: Trade as a Complement to a Monetary Future By Michael G. Plummer
  5. Monte-Carlo Estimations of the Downside Risk of Derivative Portfolios By Patarick Leoni;
  6. Danske lægers turnusordning By Jens Leth Hougaard; Jacob Michelsen Kolind; Lars Peter Østerdal
  7. What determines the output drop after an energy price increase: household or firm energy share? By Rajeev Dhawan; Karsten Jeske
  8. Measurement of uncertainty costs with dynamic traffic simulations By A. de Palma; F. Marchal

  1. By: Neugart, Michael
    Abstract: I develop an agent-based computational economics (ACE) model with which I evaluate the aggregate impact of labor market policies. The findings are that government-financed training measures increase the outflow rate from unemployment to employment. Although the overall effect is positive this effect is achieved by reducing the outflow rate for those who do not receive subsidies. Furthermore, the outflow rate would have been downward-biased had one supposed a matching function that is exogenous to policies.
    Keywords: Labor market policy evaluation; agent-based computational model; endogenous matching function; job displacement
    JEL: J60 C63 J68
    Date: 2006–06
  2. By: Riipinen , Toni (BOFIT)
    Abstract: This work considers effects of energy market liberalisation in the countries of the former Soviet Union (FSU). Our analysis is based on a computable general equilibrium (CGE) model called the Global Trade Analysis Project (GTAP). This specialised model makes it possible to evaluate effects in a general equilibrium set-up. Energy market reforms are widely discussed in the literature, but the use of CGE models has been limited. In the main part of the paper, we perform two experiments. The first is a benchmark liberalisation experiment in which all government taxes and subsidies are removed. The second is an attempt to simulate an increase in the export capacity of energy commodities into the European markets. In general, we find that liberalisation of FSU energy markets would increase welfare in the EU countries, while in the FSU welfare would decrease. This result is mainly due to the terms of trade effect, as export prices of FSU countries decrease.
    Keywords: energy; computable general equilibrium models; former Soviet Union; welfare analysis
    Date: 2007–09–06
  3. By: Bredström, David (Dept. of Mathematics, Linköping University); Jörnsten, Kurt (Dept. of Finance and Management Science, Norwegian School of Economics and Business Administration); Rönnqvist, Mikael (Dept. of Finance and Management Science, Norwegian School of Economics and Business Administration)
    Abstract: We describe a new approach to produce integer feasible columns to a set partitioning problem directly in solving the linear programming (LP) relaxation using column generation. Traditionally, column generation is aimed to solve the LP relaxation as quick as possible without any concern of the integer properties of the columns formed. In our approach we aim to generate the columns forming the optimal integer solution while simultaneously solving the LP relaxation. By this we can remove column generation in the branch and bound search. The basis is a subgradient technique applied to a Lagrangian dual formulation of the set partitioning problem extended with an additional surrogate constraint. This extra constraint is not relaxed and is used to better control the subgradient evaluations. The column generation is then directed, via the multipliers, to construct columns that form feasible integer solutions. Computational experiments show that we can generate the optimal integer columns in a large set of well known test problems as compared to both standard and stabilized column generation and simultaneously keep the number of columns smaller than standard column generation.
    Keywords: Linear Programming; Branch and Bound tree; Lagrangian dual formulation
    JEL: C61
    Date: 2007–08–09
  4. By: Michael G. Plummer (Johns Hopkins University SAIS-Bologna, Italy and Ganeshan Wignaraja, Asian Development Bank)
    Abstract: Bilateral and regional cooperation initiatives in Asia have been growing in importance over the last five years. These accords span the real and financial sectors; rather than following the more typical pattern of Òtrade first, money laterÓ, recent policy initiatives involve the simultaneous implementation of trade and monetary/financial accords. Given this sequence, is there a case for monetary union in East Asia? Is there a case for expanded free-trade areas (FTAs) in the region? This paper attempts to answer these questions using a variety of empirical techniques, including a Computational General Equilibrium (CGE) model, to evaluate the economics of monetary/financial integration and various configurations of FTAs in Asia. We conclude that, at present, the post-sequencing of economic integration in Asia is developing such that trade agreements will ultimately complement the movement toward financial and monetary integration. While the political constraint on monetary union is real, it is argued that FTAs should help relax this constraint, adding a political complement to the trade complement.
    Date: 2007–07
  5. By: Patarick Leoni (Economics Department, National University of Ireland, Maynooth);
    Abstract: We simulate the performances of a standard derivatives portfolio to evaluate the relevance of benchmarking in terms of downside risk reduction. The simulation shows that benchmarking always leads to significantly more severe losses in average than those generated by letting the portfolio reach the end of a given horizon. Moreover, switching from a 0-correlation across underlyings to a very mild form of correlation significantly increases the probability of reaching the downside benchmark before maturity, whereas adding more correlation does not significantly increase this figure.
    Keywords: : Derivatives; Portfolio management; Benchmarking; Downside risk; Monte-Carlo simulations.
    Date: 2007
  6. By: Jens Leth Hougaard (Department of Economics, University of Copenhagen); Jacob Michelsen Kolind (Department of Economics, University of Copenhagen); Lars Peter Østerdal (Department of Economics, University of Copenhagen)
    Abstract: A medical internship is mandatory for all medical students graduating from a Danish university. The internships are distributed fairly even amongst most Danish hospitals, m.a. in order to secure a steady inflow of new doctors to all regions of Denmark. When allocating the graduates to an internship by lottery, the National Board of Health takes into account only the candidates preferences over the various internships, for reasons discussed in the paper. However, a problem, relating to the lottery which the NBH uses, is that the lottery itself is not efficient in an economic sense. By way of simulations this article shows how an alternative lottery built on the so-called EPS-algorithm developed by Katta and Sethuraman [Journal of Economic Theory 131, 231-250] performs better than the lottery used today. This, along with other problematic aspects such as black-market trading of internships, indicates that a replacement of the currently used lottery may be beneficial for the NBH as well as the graduating medical students.
    Date: 2007–08
  7. By: Rajeev Dhawan; Karsten Jeske
    Abstract: During the past thirty-five years, energy use as a fraction of output has dropped significantly at both the household and the firm levels. Therefore, we investigate a dynamic stochastic generalized equilibrium model economy's response to an energy price hike for different firm and household energy shares. Simulation results indicate that the economy's output response is mainly determined by the firm energy share. Increasing the household energy share while keeping firm energy share constant actually decreases the output response.
    Date: 2007
  8. By: A. de Palma (ENPC and THEMA, Université de Cergy-Pontoise, 33 bd. du Port, F-95011 CERGY-PONTOISE, France); F. Marchal (Laboratory of Transportation Economics (LET), CNRS, Ave. Berthelot 14, F-69363 LYON, France)
    Abstract: Non-recurrent congestion in transportation networks occurs as a consequence of stochastic factors affecting demand and supply. Intelligent Transportation Systems such as Advanced Traveler Information Systems (ATIS) and Advanced Traffic Management Systems (ATMS) are designed in order to reduce the impacts of non-recurrent congestion by providing information to a fraction of users or by controlling the variability of traffic flows. For these reasons, the design of ATIS and ATMS requires reliable forecast of non-recurrent congestion. This paper proposes a new method to measure the impacts of non-recurrent congestion on travel costs by taking risk aversion into account. The traffic model is based on the dynamic traffic simulations model METROPOLIS. Incidents are generated randomly by reducing the capacity of the network. Users can instantaneously adapt to the unexpected travel conditions or can also change their behavior via a day-to-day adjustment process. Comparisons with incident-free simulations provide a benchmark for potential travel time savings that can be brought in by a state-of-the-art information system. We measure the impact of variable travel conditions by describing the willingness to pay to avoid risky or unreliable journeys. Indeed, for risk averse drivers, any uncertainty corresponds to a utility loss. This utility loss is computed for several levels of network disruption. The main results of the paper is that the utility loss due to uncertainty is of the same order of magnitude as the total travel costs.
    Date: 2007

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