New Economics Papers
on Computational Economics
Issue of 2010‒04‒04
ten papers chosen by

  1. Macroeconomic fluctuations and propagation mechanisms: an agent-Based simulation model By Sella Lisa
  2. Forecasting with a CGE model: does it work? By Peter B. Dixon; Maureen T. Rimmer
  3. A Non-Parametric Microsimulation Approach to Assess Changes in Inequality and Poverty By Rob Vos; Marco V. Sánchez
  4. Theoretical Structure of the FAGE Model By Jingliang Xiao
  5. A Structural Dynamic Micro-Simulation Model for Policy Analysis: Application to Pension Reform, Income Tax Changes and Rising Life Expectancy By Justin van de Ven; Martin Weale
  6. Proving the Performance of a New Revenue Management System By Kalyan Talluri; Fernando Castejon; Begoña Codina; Juan Magaz
  7. China's Growing Demand for Energy and Primary Inputs - Terms of trade Effects on Neighbouring Countries By Yinhua Mai; Philip Adams; Peter B. Dixon
  8. A New Model for Designing a Product Line Using TURF Analysis By Daniel Serra
  9. Demographic Change and the Labour Share of Income By Torsten Schmidt; Simeon Vosen
  10. Public Pensions, Changing Employment Patterns, and the Impact of Pension Reforms across Birth Cohorts: A Microsimulation Analysis for Germany By Johannes Geyer; Viktor Steiner

  1. By: Sella Lisa
    Date: 2009–12
  2. By: Peter B. Dixon; Maureen T. Rimmer
    Abstract: Computable general equilibrium models can be used to generate detailed forecasts of output growth for commodities/industries. The main objective is to provide realistic baselines from which to calculate the effects of policy changes. In this paper, we assess a CGE forecasting method that has been applied in policy analyses in the U.S. and Australia. Using data available up to 1998, we apply the method with the USAGE model to generate "genuine forecasts" for 500 U.S. commodities/industries for the period 1998 to 2005. We then compare these forecasts with actual outcomes and with alternate forecasts derived as extrapolated trends from 1992 to 1998.
    Keywords: CGE validation Forecasting U S CGE
    JEL: C68 E37 F14
    Date: 2009–05
  3. By: Rob Vos; Marco V. Sánchez
    Abstract: This paper presents a non-parametric microsimulation methodology for assessing the determinants of changes in income inequality and poverty. One great advantage of this method over alternatives is that it is not very demanding in terms of modelling labour supply and household behaviour while still providing a plausible link between changes in overall labour market conditions and the full household income distribution. The paper also shows how the method can be adapted to assess the poverty and inequality effects of changes in non-labour incomes (such as through a government transfer programme) and how it can be combined with economy-wide models.
    Keywords: Non-parametric simulation methods; Computable General Equilibrium Models; Income Distribution; Employment, Unemployment, and Wages; Measurement and Analysis of Poverty; Effects of Welfare Programs; Supply and Demand for Labour; Segmented Labour Markets
    JEL: C14 C15 C16 C68 D31 E24 I32 I38 J21 J24
    Date: 2010–03
  4. By: Jingliang Xiao
    Abstract: This paper explains the theoretical framework of the Financial Applied General Equilibrium (FAGE) model as developed in Xiao (2009). FAGE is a MONASH-style dynamic CGE model for China with a detailed financial extension. In section 1, we discuss a stylized version of the financial module. Section 2 discusses the important aspects of the full version of the FAGE model, such as, the database and investment theory. .
    Keywords: dynamic CGE, financial market, monetary policy
    JEL: C68 D58 E44 E52 E62 F31
    Date: 2010–03
  5. By: Justin van de Ven; Martin Weale
    Abstract: This paper describes the National Institute’s Benefit and Tax Model, NIBAX and provides results of studies using it to explore i) the introduction of low-cost pensions similar to Personal Accounts, ii) the effects of the abolition of the 10p income tax rate and iii) the consequences of rising life expectancy.
    Date: 2009–07
  6. By: Kalyan Talluri; Fernando Castejon; Begoña Codina; Juan Magaz
    Abstract: Revenue management (RM) is a complicated business process that can best be described as control of sales (using prices, restrictions, or capacity), usually using software as a tool to aid decisions. RM software can play a mere informative role, supplying analysts with formatted and summarized data who use it to make control decisions (setting a price or allocating capacity for a price point), or, play a deeper role, automating the decisions process completely, at the other extreme. The RM models and algorithms in the academic literature by and large concentrate on the latter, completely automated, level of functionality. A firm considering using a new RM model or RM system needs to evaluate its performance. Academic papers justify the performance of their models using simulations, where customer booking requests are simulated according to some process and model, and the revenue perfor- mance of the algorithm compared to an alternate set of algorithms. Such simulations, while an accepted part of the academic literature, and indeed providing research insight, often lack credibility with management. Even methodologically, they are usually awed, as the simula- tions only test \within-model" performance, and say nothing as to the appropriateness of the model in the first place. Even simulations that test against alternate models or competition are limited by their inherent necessity on fixing some model as the universe for their testing. These problems are exacerbated with RM models that attempt to model customer purchase behav- ior or competition, as the right models for competitive actions or customer purchases remain somewhat of a mystery, or at least with no consensus on their validity. How then to validate a model? Putting it another way, we want to show that a particular model or algorithm is the cause of a certain improvement to the RM process compared to the existing process. We take care to emphasize that we want to prove the said model as the cause of performance, and to compare against a (incumbent) process rather than against an alternate model. In this paper we describe a \live" testing experiment that we conducted at Iberia Airlines on a set of flights. A set of competing algorithms control a set of flights during adjacent weeks, and their behavior and results are observed over a relatively long period of time (9 months). In parallel, a group of control flights were managed using the traditional mix of manual and algorithmic control (incumbent system). Such \sandbox" testing, while common at many large internet search and e-commerce companies is relatively rare in the revenue management area. Sandbox testing has an undisputable model of customer behavior but the experimental design and analysis of results is less clear. In this paper we describe the philosophy behind the experiment, the organizational challenges, the design and setup of the experiment, and outline the analysis of the results. This paper is a complement to a (more technical) related paper that describes the econometrics and statistical analysis of the results.
    Keywords: Revenue management, airlines, sandbox testing,econometric analysis.
    JEL: M11 M31 L93
    Date: 2009–11
  7. By: Yinhua Mai; Philip Adams; Peter B. Dixon
    Abstract: In this study, we analysed the terms of trade effects of China's rapid growth on its neighbouring countries using a dynamic global CGE model, the MMC model. We first simulated a "real" or convergence scenario -showing how the economies of China and its neighbours might evolve based on historical data during 1997-2005 and on prevailing historical trends during 2005-2010. We then simulate a non-convergence scenario, in which it is assumed that technological progress in China proceeds in line with progress in the United States, rather than at the rate consistent with the convergence scenario. The simulation results show that, indeed, China's technological convergence leads to increased world prices for mining products and to lower world prices for manufactures, especially those it exports extensively. However, this study also identified positive effects that China's convergence has on the neighbouring countries' terms of trade. The rise in the prices of energy and primary inputs tends to increase the export price index of exporters of these products. The fall in the price of manufactured goods reduces the import price index for countries that source a significant share of their manufactured imports from China. Furthermore, China's convergence leads to expansion in world trade which, in turn, leads to increased demand for exports of transportation and insurance services. Consequently, China's convergence tends to have a positive impact on prices of services exports. Due to the offsetting factors, the overall impact of the convergence on terms of trade is small and varies depending on the economic structure of each of the neighbouring countries. The impact of China's rapid growth on most of the neighbouring countries' real GDP and GNP are positive.
    Keywords: terms of trade effects China's energy demand China's rapid growth Dynamic CGE modeling
    JEL: O10 O40 Q41 C68
    Date: 2009–08
  8. By: Daniel Serra
    Abstract: This paper introduces the approach of using TURF analysis to design a product line through a binary linear programming model. This improves the efficiency of the search for the solution to the problem compared to the algorithms that have been used to date. Furthermore, the proposed technique enables the model to be improved in order to overcome the main drawbacks presented by TURF analysis in practice.
    Keywords: TURF analysis, Binary programming, product design
    JEL: C61 M31
    Date: 2010–02
  9. By: Torsten Schmidt; Simeon Vosen
    Abstract: Despite similar levels of per capita income, education, and technology the development of labour shares in OECD countries has displayed diff erent patterns since 1960. The paper examines the role of demography in this regard. Employing an overlapping generations model we fi rst examine the mechanisms through which demographic change can aff ect labour shares. Model simulations show that demographic eff ects on the labour share are larger in open than in closed economies. Empirical estimates, conducted using panel cointegration techniques for a panel of 18 OECD countries, provide strong support for demographic eff ects on the labour share. In line with the simulation results, we also fi nd evidence that openness increases this impact.
    Keywords: Labour share; demographic change; panel cointegration
    JEL: E25 J10 D91 C23
    Date: 2010–02
  10. By: Johannes Geyer; Viktor Steiner
    Abstract: We analyze the impact of changing employment patterns and pension reforms on the future level of public pensions across birth cohorts in Germany. The analysis is based on a rich dataset that combines household survey data from the German Socio-Economic Panel Study (SOEP) and process-produced microdata from the German pension insurance. A microsimulation model is developed which accounts for cohort effects in individual employment and unemployment and earnings over the lifecycle as well as the differential impact of recent pension reforms. Cohort effects for individuals born between 1937 and 1971 vary greatly by region, gender and education and strongly affect lifecycle wage profiles. The largest effects can be observed for younger cohorts in East Germany and for the low educated. Using simulated life cycle employment and income profiles, we project gross future pensions across cohorts taking into account changing demographics and recent pension reforms. Simulations show that pension levels for East German men and women will fall dramatically among younger birth cohorts, not only because of policy reforms but due to higher cumulated unemployment. For West German men, the small reduction of average pension levels among younger birth cohorts is mainly driven by the impact of pension reforms, while future pension levels of West German women are increasing or stable due to rising labor market participation of younger birth cohorts.
    Keywords: Public pensions, cohort effects, microsimulation
    JEL: H55 J26 J11
    Date: 2010

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