New Economics Papers
on Computational Economics
Issue of 2009‒12‒19
twelve papers chosen by

  1. A Genetic Algorithm for the Single Machine Maximum Lateness Problem By V. SELS; M. VANHOUCKE
  2. Evolutionary multi-stage financial scenario tree generation By Ronald Hochreiter
  3. Transaction taxes and traders with heterogeneous investment horizons in an agent-based financial market model / By Demary, Markus
  4. Evolution of the Week By Amy Peng; Francis McKenna
  5. From men and machines to the organizational learning curve By Fioretti, Guido
  6. Multi-mode resource constrained pro ject scheduling using RCPSP and SAT solvers By J. COELHO; M. VANHOUCKE
  7. The ZEW combined microsimulation-CGE model: innovative tool for applied policy analysis By Clauss, Markus; Schubert, Stefanie
  8. Demographic Changes and the Gains from Globalisation: An Overlapping Generations CGE Analysis By Marcel Mérette; Patrick Georges
  9. Optimal tax progressivity in unionised labour markets: what are the driving forces? By Boeters, Stefan
  10. Regional Economic Modelling for Indonesia: Implementation of the IRSA-INDONESIA5 By Budy P Resosudarmo; Arief A Yusuf; Djoni Hartono; Ditya A Nurdianto
  11. Combining Rebates with Carbon Taxes: Optimal Strategies for Coping with Emissions Leakage and Tax Interactions By Fischer, Carolyn; Fox, Alan K.
  12. Public versus Private Risk Sharing By Dirk Krueger; Fabrizio Perri

    Abstract: We consider the problem of scheduling a number of jobs, each job having a release time, a processing time and a due date, on a single machine with the objective of minimizing the maximum lateness or tardiness. This problem often occurs as a sub-problem in solving other scheduling environments such as flow shops or job shops. We developed a genetic algorithm and compared its performance with alternative methods on diverse data sets. Based on a literature study on genetic algorithms in single machine scheduling, a fair comparison of genetic operators was made. We performed an extensive study of local search algorithms, based on the trade-off between the intensification and diversification strategy. Computational results further revealed that combining different neighborhoods in an intelligent manner can remarkably improve the solution quality.
    Date: 2009–09
  2. By: Ronald Hochreiter
    Abstract: Multi-stage financial decision optimization under uncertainty depends on a careful numerical approximation of the underlying stochastic process, which describes the future returns of the selected assets or asset categories. Various approaches towards an optimal generation of discrete-time, discrete-state approximations (represented as scenario trees) have been suggested in the literature. In this paper, a new evolutionary algorithm to create scenario trees for multi-stage financial optimization models will be presented. Numerical results and implementation details conclude the paper.
    Date: 2009–12
  3. By: Demary, Markus
    Abstract: This heterogeneous interacting agents model of a financial market is a generalization of the model proposed by Westerhoff (The Use of Agent-Based Financial Market Models to Test the Effectiveness of Regulatory Policies) by traders who are allowed to have different investment horizons as introduced by Demary (Who Does a Currency Transaction Tax Harm More: Short-term Speculators or Long-term Investors?). Our research goals are, first, to study what consequences the introduction of heterogeneous investment horizons has for agent-based financial market models and second, how effective transaction taxes are in stabilizing financial markets. In detail, we are interested in how the popularity of different trading rules and investment horizons change due to taxation and how emergent properties from the interaction of traders like bubbles and crashes, excess volatility, excess kurtosis and volatility clustering change. Numerical simulations reveal that under taxation traders abstain from short-term trading in favour of longer investment horizons. This change in behavior leads to less excess volatility and diminishing volatility clusters for small tax rates. When the tax rate exceeds a certain threshold, excess volatility and misalignments increase as also found in Westerhoff (Heterogeneous Traders and the Tobin Tax). The reason is, that the longer term fundamentalist trading rule becomes unpopular in favor of the longer term trend-chasing rule. --
    Keywords: Financial Market Stability,Heterogeneous Interacting Agents Model,Speculative Bubbles,Stylized Facts,Technical and Fundamental Analysis,Transaction Taxes
    JEL: C15 D84 G15 G18
    Date: 2009
  4. By: Amy Peng (Department of Economics, Ryerson University, Toronto, Canada); Francis McKenna (Ontario Ministry of Finance, Toronto, Canada)
    Abstract: The purpose of this paper is to provide an intuitive explanation of the emergence and evolution of the week based on a historical precedent draw from ancient Egypt. In this paper, we view the week as a coordinating social institution that was created to resolve a fundamental problem of society - coordinating market exchange. Artificial adaptive agents are used to simulate the interactions among farmers going to market. The results show that the length of the week that emerges depends on the chosen cost and benefit specifications and random interactions.
    Keywords: social institution, coordination games, agent based models
    JEL: D02 B52 C63
    Date: 2009–11
  5. By: Fioretti, Guido
    Abstract: Learning curves can arise out of routing problems, or out of sequencing problems, or a combination of both. In this paper, learning curves arising out of routing problems are investigated by means of numerical simulations, whereas some properties of the learning curves arising out of sequencing problems are analyzed by means of a computational model. In both cases, the arousal of organizational learning curves is conceived as the emergence of routines. In both cases, the conditions for this to occur are that (i) there are sufficiently many novel possibilities of arranging the units composing the organization, and that (ii) these units are sufficiently many and sufficiently flexible.
    Keywords: Learning Curves; Routing Problems; Sequencing Problems; Routines
    JEL: M11 D29 D85
    Date: 2009–11–29
    Abstract: This paper reports on a new solution approach for the well-known multi-mode resource-constrained project scheduling problem (MMRCPSP). This problem type aims at the selection of a single activity mode from a set of available modes in order to construct a precedence and a (renewable and non-renewable) resource feasible project schedule with a minimal makespan. The problem type is known to be NPhard and has been solved using various exact as well as (meta-)heuristic procedures.<br><br>The new algorithm splits the problem type into a mode assignment and a single mode project scheduling step. The mode assignment step is solved by a satisfiability (SAT) problem solver and returns a feasible mode selection to the project scheduling step. The project scheduling step is solved using a efficient meta-heuristic procedure from literature to solve the resource-constrained project scheduling problem (RCPSP). However, unlike many traditional meta-heuristic methods in literature to solve the MMRCPSP, the new approach executes these two steps in one run, relying on a single priority list. Straightforward adaptations to the pure SAT solver by using pseudo boolean non-renewable resource constraints has led to a high quality solution approach in a reasonable computational time. Computational results show that the PSPLIB problem instances can be solved better than the current best procedures from literature.
    Keywords: project scheduling, SAT, multi-mode RCPSP
    Date: 2009–09
  7. By: Clauss, Markus; Schubert, Stefanie
    Abstract: This contribution describes the linkage of microsimulation models and computable general equilibrium (CGE) models using two already established models called “STSM” and “PACE-L” used by the Centre for European Economic Research. This state of the art research method for applied policy analysis combines the advantages of both model types: On the one hand, microsimulation models allow for detailed labor supply and distributional effects due to policy measures, as individual household data is used. On the other hand, by using a general equilibrium framework, labour market responses, such as wage and labour demand reactions are taken into account. --
    Keywords: microsimulation,applied CGE analysis,linked micro-macro models
    JEL: C68 C81 D58 J22 J23
    Date: 2009
  8. By: Marcel Mérette (Department of Economics, University of Ottawa); Patrick Georges (Graduate School of Public and International Affairs,University of Ottawa)
    Abstract: This paper develops a multi-country overlapping-generations general equilibrium model to gauge the economic impacts of demographic changes in the global economy and its transmission effects on different countries. Although severe demographic pressures contribute to significantly lower real GDP per capita across several regions in the world, globalisation through international trade generates an improvement in the terms of trade of older OECD countries, which sustains their real consumption per capita, while globalisation through capital flows stimulates capital deepening and therefore growth in younger countries such as India and various parts of the Rest of the World. The general equilibrium nature of the ageing process is crucial to understand the net foreign asset dynamics of countries during the demographic transition, and this is particularly relevant for a country like China that is caught, in the global economy, between relatively older and younger countries. On this regard China, unlike older countries, does not benefit from a terms of trade improvement which could otherwise sustain its consumption, nor does it benefit, unlike India, from capital deepening, which could otherwise sustain its GDP growth.
    Keywords: Inequality Demographic transition, ageing, globalisation, overlapping generations, computable general equilibrium modeling
    JEL: D58 F41 J11
    Date: 2009
  9. By: Boeters, Stefan
    Abstract: In labour markets with collective wage bargaining higher progressivity of the labour income tax creates a trade-off. On the one hand, wages are lowered and unemployment decreases, on the other hand, the individual labour supply decision is distorted at the hours-of-work margin. The optimal level of tax progressivity within this trade-off is determined using a numerical general equilibrium model with imperfect competition on the goods market, collective wage bargaining and a labour-supply module calibrated to empirically plausible elasticity values. The model is calibrated to macroeconomic and institutional parameters of both the OECD average and a number of individual OECD-countries. In most cases the optimal degree of tax progressivity is below the actual level. A decomposition approach shows that the optimal level is increased by high unemployment and by the general tax level. --
    Keywords: labour taxation,tax progressivity,optimal taxation,collective wage bargaining,unemployment
    JEL: H21 J22 J51 J64
    Date: 2009
  10. By: Budy P Resosudarmo; Arief A Yusuf; Djoni Hartono; Ditya A Nurdianto
    Abstract: Ten years after the implementation of a major decentralization policy, issues of inter-regional disparities in income and rates of natural resource extraction still figure prominently in Indonesian economic policy debate. There is great interest in identifying the macro policies that would reduce regional income disparity and better control the rate of natural extraction, while maintaining reasonable national economic growth. In this paper we develop an inter-regional computable general equilibrium model (IRSA-INDONESIA5) as an appropriate tools for analysis these issues and employ it to examine economy-wide impacts of various policies under consideration.
    Keywords: Computable General Equilibrium, Development Planning and Policy, Environmental Economics.
    JEL: C68 O20 Q50
    Date: 2009
  11. By: Fischer, Carolyn (Resources for the Future); Fox, Alan K.
    Abstract: Emissions regulations like carbon pricing raise the price of covered sector goods and thus can interact with and exacerbate other preexisting distortions in the economy. One such distortion is labor taxes. Another is emissions “leakage” due to the lack of comparable emissions pricing abroad or among other emitting sectors at home. A potential response is to combine the emissions tax with a rebate to production to mitigate the price increases. We use an optimal tax framework to solve for the optimal emissions tax and output rebate, given these distortions. We then employ a multisector computable general equilibrium model based on the GTAP framework to simulate the effects of a $50 per-ton carbon tax on the major emissions-intensive sectors in the U.S. economy and estimate optimal rebates by sector.
    Keywords: carbon tax, tax interaction, carbon leakage
    JEL: Q2 Q43 H2 D58 D61
    Date: 2009–05–19
  12. By: Dirk Krueger; Fabrizio Perri
    Abstract: Can public insurance through redistributive income taxation improve the allocation of risk in an economy in which private risk sharing is limited? The answer depends crucially on the fundamental friction that limits private risk sharing in the first place. If risk sharing is incomplete because some insurance markets are missing for model-exogenous reasons (as in Bewley, 1986 and Aiyagari, 1994) publicly provided risk sharing via a tax system generally improves on the allocation of risk. If instead private insurance markets exist but their use is limited by the absence of complete enforcement (as in Kehoe and Levine, 1993 and Kocherlakota, 1996) then the provision of public insurance can crowd out private insurance to such an extent that total consumption insurance is reduced. By reducing income risk the tax system increases the value of being excluded from private insurance markets and hence weakens the enforcement mechanism of these contracts. In this paper we theoretically characterize and numerically compute equilibria in an economy with limited enforcement and a continuum of agents facing realistic income risk and tax systems with various degrees of risk reduction (progressivity). We find that the crowding-out effect of public insurance on private insurance in the limited enforcement model can be quantitatively important, as is the positive insurance effect of taxation in the Bewley model.
    JEL: D52 E62 H31
    Date: 2009–12

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