New Economics Papers
on Computational Economics
Issue of 2010‒07‒17
thirteen papers chosen by

  1. Agent-Based Modeling: The Right Mathematics for the Social Sciences? By Borrill, Paul L.; Tesfatsion, Leigh S.
  2. Cloud Computing Value Chains Understanding Businesses and Value Creation in the Cloud By Ashraf Bany Mohammed; Jorn Altmann; Junseok Hwang
  3. Optimal tax progressivity in unionised labour markets: Simulation results for Germany By Boeters, Stefan
  4. Technical Appendix to "Transitional Dynamics of Dividend and Capital Gains Tax Cuts" By Francois Gourio; Jianjun Miao
  5. Biofuels and economic development in Tanzania By Arndt, Channing; Pauw, Karl; Thurlow, James
  6. Johansen's contribution to CGE modelling: originator and guiding light for 50 years By Peter B. Dixon; Maureen T. Rimmer
  7. Effects on the U.S. of an H1N1 epidemic: analysis with a quarterly CGE model By Peter B. Dixon; Bumsoo Lee; Todd Muehlenbeck; Maureen T. Rimmer; Adam Z. Rose; George Verikios
  8. A Funding and Governing Model for Achieving Sustainable Growth of Computing e-Infrastructures By Ashraf Bany Mohammed; Jorn Altmann
  9. The costs and benefits of duty-free, quota-free market access for poor countries By Bouët, Antoine; Laborde Debucquet, David; Dienesch, Elisa; Elliot, Kimberly
  10. Impact of tax rate cut cum base broadening reforms on heterogeneous firms: Learning from the German tax reform 2008 By Finke, Katharina; Heckemeyer, Jost H.; Reister, Timo; Spengel, Christoph
  11. Droughts and floods in Malawi By Pauw, Karl; Thurlow, James; van Seventer, Dirk
  12. Wage subsidies to combat unemployment and poverty By Burns, Justine; Edwards, Lawrence; Pauw, Karl
  13. The Great Depression in Belgium: an Open-Economy Analysis By Luca PENSIEROSO

  1. By: Borrill, Paul L.; Tesfatsion, Leigh S.
    Abstract: This study provides a basic introduction to agent-based modeling (ABM) as a powerful blend of classical and constructive mathematics, with a primary focus on its applicability for social science research.  The typical goals of ABM social science researchers are discussed along with the culture-dish nature of their computer experiments. The applicability of ABM for science more generally is also considered, with special attention to physics. Finally, two distinct types of ABM applications are summarized in order to illustrate concretely the dualit of ABM: Real-world systems can not only be simulated with verisimilitude using ABM; they can also be efficiently and robustly designed and constructed on the basis of ABM principles.  
    JEL: B4 C6 C9 D E
    Date: 2010–07–06
  2. By: Ashraf Bany Mohammed; Jorn Altmann; Junseok Hwang (Technology Management, Economics, and Policy Program (TEMEP), Seoul National University)
    Abstract: Based on the promising developments in Cloud Computing technologies in recent years, commercial computing resource services (e.g. Amazon EC2) or software-as-a-service offerings (e.g. came into existence. However, the relatively weak business exploitation, participation, and adoption of other Cloud Computing services remain the main challenges. The vague value structures seem to be hindering business adoption and the creation of sustainable business models around its technology. Using an extensive analyze of existing Cloud business models, Cloud services, stakeholder relations, market configurations and value structures, this Chapter develops a reference model for value chains in the Cloud. Although this model is theoretically based on porter's value chain theory, the proposed Cloud value chain model is upgraded to fit the diversity of business service scenarios in the Cloud computing markets. Using this model, different service scenarios are explained. Our findings suggest new services, business opportunities, and policy practices for realizing more adoption and value creation paths in the Cloud.
    Keywords: Cloud computing, value chain, business models, Grid computing, service oriented computing, value networks, software-as-a-service, Grid economics, services, service sciences.
    JEL: D02 D21 D23 D46 D85 L14 L23 L86 M21
    Date: 2010–06
  3. By: Boeters, Stefan
    Abstract: Changing the income tax progressivity in labour markets with collective wage bargaining generates a trade-off. On the one hand, higher progressivity distorts individual labour supply decisions at the hours-of-work margin, on the other hand, it reduces unemployment by exerting downward pressure on wages. This trade-off is quantitatively assessed using a numerical model for Germany. The model combines a microsimulation module, which captures the labour-supply decisions of approximately 4600 individual households, and a macro (computable general equilibrium) module, which features collective wage bargaining and involuntary unemployment. In the simulations carried out using this model, the optimal degree of tax progressivity turns out to be higher than the one in the actual German tax schedule. The optimum is located at marginal tax rates that are 6 percentage points higher than the actual rates (combined with a transfer that balances the public budget). The welfare gain from such a reform is modest, however. It amounts to no more than two euros per person per month. --
    Keywords: labour taxation,tax progressivity,optimal taxation,collective wage bargaining,unemployment,microsimulation,computable general equilibrium model
    JEL: C63 C68 H21 J22 J51 J64
    Date: 2010
  4. By: Francois Gourio (Boston University); Jianjun Miao (Boston University)
    Abstract: In this appendix, we present the details of the extended model with debt in our paper "Transitional Dynamics of Dividend and Capital Gains Tax Cuts." Section 1 presents the extended model and results. Section 2 presents the numerical algorithm to solve this model. Section 3 presents an extensiongure for the simulation conducted in Section 3 of our original paper.additional
    Date: 2010
  5. By: Arndt, Channing; Pauw, Karl; Thurlow, James
    Abstract: Biofuels provide a new opportunity to enhance economic development in Tanzania. Drawing on detailed cost estimates, we develop a dynamic computable general equilibrium model to estimate the impact of different biofuel production scenarios on growth and poverty. Our results indicate that maximizing the poverty-reducing effects of a biofuels industry in Tanzania requires engaging and improving the productivity of smallholder farmers. Evidence shows that cassava-based ethanol production is more profitable than other feedstock options. Our findings also indicate that cassava generates higher levels of pro-poor growth than do sugarcane-based systems. However, if smallholder yields can be improved rather than expanding cultivated land, then sugarcane and cassava outgrower schemes can produce similar pro-poor outcomes. We conclude that in so far as the public investments needed to establish a biofuels industry in Tanzania are in accordance with national development plans, producing biofuels will contribute to achieving the country’s overall development objectives.
    Keywords: Biofuels, Cassava, Computable general equilibrium (CGE) model, Growth, Poverty,
    Date: 2010
  6. By: Peter B. Dixon; Maureen T. Rimmer
    Abstract: Fifty years ago the Norwegian economist, Leif Johansen, gave us what is now recognised as the first CGE model. While Johansen was first, he is not the father of the whole field. CGE modelling in different styles sprang largely independently from several sources. This paper describes how Johansen's style of CGE modelling took root in Australia in the 1970s and has from there spread to the rest of the world. Today, thousands of economists from nearly every country are undertaking Johansen-style CGE modelling to elucidate policy questions in trade, taxation, environment, labour markets, immigration, income distribution, technology, resources, micro-economic reform and macro stabilization.
    Keywords: CGE modelling, Leif Johansen
    JEL: C68 B23 B31
    Date: 2010–05
  7. By: Peter B. Dixon; Bumsoo Lee; Todd Muehlenbeck; Maureen T. Rimmer; Adam Z. Rose; George Verikios
    Abstract: We simulate the effects of a hypothetical H1N1 epidemic in the U.S. using a quarterly CGE model. Quarterly periodicity allows us to capture the short-run nature of an epidemic. We find potentially severe economic effects in the peak quarter. Averaged over the epidemic year the effects are considerably damped. Our results indicate that the macroeconomic consequences of an epidemic are more sensitive to demand-side effects such as reductions in international tourism and leisure activities than to supply-side effects such as reductions in productivity. This suggests that demand stimulus policies might be an appropriate economic response to a serious epidemic.
    Keywords: Influenza epidemic Quarterly CGE modelling
    JEL: I18 C68
    Date: 2010–06
  8. By: Ashraf Bany Mohammed; Jorn Altmann (Technology Management, Economics, and Policy Program (TEMEP), Seoul National University)
    Abstract: The current access policies and funding schemes of computing e-infrastructures represent a huge challenge for the sustainable growth of computing e-infrastructures and a serious jeopardy for investments made into these e-infrastructures. In order to be able to address these issues, the economics of computing e-infrastructures has to be understood thoroughly. As a first step in this direction, this paper conducts a set of computing e-infrastructure case studies and discusses the economic issues of different global computing e-infrastructure efforts. The analyses results show that the major shortcomings that need to be resolved are the insufficient involvement of the private sector in the development of computing e-infrastructures, the restricted user access to e-infrastructure resources, and the lack of sustainable funding. As a solution to these shortcomings, we propose a new funding and governing model for computing e-infrastructures. It follows a token-based market mechanism that allows a business-oriented operation of the computing e-infrastructure. We argue that this new model fosters the transition towards a sustainable computing e-infrastructure, being another requirement for successfully implementing the Cloud computing vision. Our arguments are supported by an analytical analysis.
    Keywords: Grid and Cloud Economics, Business Models, Funding, Governance, Case Study Analysis, Sustainability, Grid Computing, High-Performance Computing, Token-Based Market Mechanism, Computing Services, Analytical Modeling
    JEL: C61 C63 D01 D02 D21 D23 D40 D45 D46 H81 L23 L86 M21
    Date: 2010–06
  9. By: Bouët, Antoine; Laborde Debucquet, David; Dienesch, Elisa; Elliot, Kimberly
    Abstract: This paper examines the potential benefits and costs of providing duty-free, quota-free (DFQF) market access to the least developed countries and the effects of extending eligibility for DFQF access to other small and poor countries. Using the MIRAGE computable general equilibrium model, the paper assesses the impact of scenarios involving different levels of coverage for products, recipient countries, and preference-giving countries on participating countries, as well as competing developing countries that are excluded. The main goals of this paper are to highlight the role that rich and emerging countries could play in helping poor countries to improve their trade performance, to assess the distribution of costs and benefits for developing countries, and to determine whether the potential costs for domestic producers are in line with political feasibility in preference-giving countries.
    Keywords: CGE Modeling, duty-free market access, preference erosion, technical barriers to trade, Trade policy,
    Date: 2010
  10. By: Finke, Katharina; Heckemeyer, Jost H.; Reister, Timo; Spengel, Christoph
    Abstract: The German corporate tax reform of 2008 has brought about important cuts in corporate tax rates, which were at the same time accompanied by significant changes in the determination of the tax base for both major German corporate taxes - corporate income tax and trade tax. The reform followed the distinct and internationally prevalent pattern of tax rate cut cum base broadening. Its implications are thus not unique to Germany. Especially in view of the current economic crisis, questions on the distribution of the tax burden among firms of different characteristics have arisen and still remain at the heart of the academic and political debate in Germany and other countries. In this paper we present a new corporate microsimulation model, ZEW TaxCoMM, which allows for the coherent micro-based analysis of revenue implications of tax reforms and the distribution of tax consequences among heterogeneous firms. The model processes firm-level financial accounting input data and derives the firm specific tax base and tax due endogenously in accordance with the tax code. To smooth out distortions between the sample and the population of German corporations, the sample is extrapolated on the basis of the corporate income tax statistic. The simulation results show inter alia that the average annual relief as measured by the average decline in the effective tax burden on cash flow amounts to 2.8 percentage points for large corporations and to 6 percentage points for small corporations. Furthermore, the results illustrate that firms with low profitability, high debt ratio and high capital intensity benefit least from the reform. As to tax revenues, the reform induced decrease amounts to 9.8 billion and the trade tax gains fiscally in importance. --
    Keywords: tax reform,microsimulation,tax policy evaluation
    JEL: H25 H32 K34 C8
    Date: 2010
  11. By: Pauw, Karl; Thurlow, James; van Seventer, Dirk
    Abstract: Malawi suffers frequent droughts and floods. In an economy that is heavily dependent on the agricultural sector, it is crucial to understand the implications of these extreme climate events. Not only are rural livelihoods affected due to the severe impacts on the agricultural sector, but nonfarm and urban households are also vulnerable given the strong production and price linkages between agriculture and the rest of the economy. This study uses a general equilibrium model to estimate the economywide impacts of drought- and flood-related crop production losses. Climate simulations are based on production loss estimates from stochastic drought and flood models. Model results show that the economic losses due to extreme climate events are significant: Malawi loses 1.7 percent of its gross domestic product on average every year due to the combined effects of droughts and floods. This is equivalent to almost US$22 million in 2005 prices. Given their crop choices, it is smaller-scale farmers and those in the flood-prone southern regions of the country who are worst affected. However, urban and nonfarm households are not spared. Food shortages lead to sharp price increases that reduce urban households’ disposable incomes. This study makes an important contribution by estimating the economywide impacts of extreme climate events. However, this is only the first step toward designing appropriate agricultural and development strategies that explicitly account for climate uncertainty.
    Keywords: agricultural sector, CGE Modeling, Droughts, floods, Gross Domestic Product (GDP), households, Livelihoods, Poverty,
    Date: 2010
  12. By: Burns, Justine; Edwards, Lawrence; Pauw, Karl
    Abstract: Wage or employment subsidies have been used in both developed and developing countries to raise employment levels. Various advisers to the South African government have endorsed wage subsidies as a policy measure to deal with this country’s massive unemployment problem. This paper takes stock of the international literature and conducts an economywide macro-micro analysis to obtain insights into wage subsidy design and implementation issues facing developing countries. It also investigates whether this policy measure is appropriate in dealing with South Africa’s particular sources of unemployment. We argue that although wage subsidies may be successful at creating jobs in South Africa, they should not be seen as the primary or dominant policy instrument for dealing with the broader unemployment problem. To enhance the effectiveness of wage subsidies, they should preferably be linked to structured workplace training, be targeted to industries where employment will be responsive to changes in labor costs, and be focused on the youth. In the long run, addressing unemployment in South Africa requires policies that improve economic growth and the economy’s employment absorption capacity, that raise skills of new labor market entrants, that reduce labor market rigidities, and that promote effective job search, especially among the youth.
    Keywords: Computable General Equilibrium (CGE) microsimulation modeling, Developing countries, economic growth, employment absorption capacity, labor costs, macro-micro analysis, Unemployment, wage subsidies,
    Date: 2010
  13. By: Luca PENSIEROSO (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES))
    Abstract: This paper studies the Great Depression in Belgium within the open-economy dynamic general equilibrium approach. Results from the simulations show that a two-good model with total factor productivity shocks and nominal exchange rate shocks can account for most of the 1929-1934 output drop. The data mimicking ability of the model is good along other dimensions as well, most notably hours worked, the consumption price index and the terms of trade. The model is also able to catch some of the dynamics of imports and exports.
    Keywords: Great Depression, Belgium, Dynamic Stochastic General Equilibrium, Open Economy
    JEL: N14 F41 E13
    Date: 2010–05–31

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