nep-cmp New Economics Papers
on Computational Economics
Issue of 2010‒07‒24
eight papers chosen by
Stan Miles
Thompson Rivers University

  1. The structure of the labour market, telecommuting, and optimal peak period congestion tolls: a numerical optimisation model By De Borger B.; Wuyts B.
  2. Energy Supply and the Sustainability of Endogenous Growth By Karen Pittel; Dirk Rübbelke
  3. The Economic and Environmental Effects of an EU Ban on Illegal Logging Imports. Insights from a CGE Assessment By Francesco Bosello; Ramiro Parrado; Renato Rosa
  4. CRED: A New Model of Climate and Development By Frank Ackerman, Elizabeth A. Stanton, Ramón Bueno
  5. The Dynamics of the Informal Economy By Roxana Gutierrez-Romero
  6. Adverse Feedback Loop in the Bank-Based Financial Systems By Adam Gersl; Petr Jakubík
  7. Global Climate Change and the Resurgence of Tropical Disease: An Economic Approach By Gollin, Douglas; Zimmermann, Christian
  8. The Price of Stability in Matching Markets By James W. Boudreau; Vicki Knoblauch

  1. By: De Borger B.; Wuyts B.
    Abstract: This paper develops a numerical optimisation model to study optimal labour and peak-period congestion taxes under different assumptions on the structure of the labour market. We consider both a competitive labour market and various wage bargaining models, in which wages are determined via negotiations between firms and labour unions. All models include commuting and non-commuting transport, and they allow for telecommuting. The models are numerically implemented using Belgian data. We find that wage bargaining models may imply higher or lower congestion tolls on peak period car traffic compared to competitive labour markets, depending on the response of unions to transport issues and the composition of the traffic flow. If unions care about the effect of congestion and congestion tolls on their members’ well being, we find the optimal congestion toll for the wage bargaining model to be 15%-20% lower than under competitive labour market conditions. However, if unions do not care about their members’ transport problems when negotiating about wages and employment, then the optimal congestion tax is up to 50% higher under bargaining than under competition. We further find that the optimal tax structure results in substantially more telecommuting for all labour market structures considered. Finally, improving the efficiency of telecommuting results in a considerable reduction in optimal congestion tolls.
    Date: 2010–06
  2. By: Karen Pittel; Dirk Rübbelke
    Abstract: The paper provides an introduction to energy, respective resource, use within the framework of endogenous growth models. We provide an overview of different modeling approaches as well as intuition with respect to the results obtained. We consider the source problem, i.e. the supply of energy, as well as the sink problem, i.e. pollution generated by the consumption of energy resources. The introduction to the theoretical framework shortly discusses the use of neoclassical versus endogenous growth models and also points to the implications of the different types of endogenous growth approaches. We additionally give an introduction to CGE-models that include energy use and present an example of a numerical solvable model in detail. The paper closes with an outlook on future research.<br />
    Keywords: endogenous growth, energy, resources, pollution, CGE-models
    Date: 2010–07
  3. By: Francesco Bosello (Fondazione Eni Enrico Mattei, University of Milan and Euromediterranean Center for Climate Change (CMCC)); Ramiro Parrado (Fondazione Eni Enrico Mattei and Euromediterranean Center for Climate Change (CMCC)); Renato Rosa (Fondazione Eni Enrico Mattei and Euromediterranean Center for Climate Change (CMCC))
    Abstract: Illegal logging is widely recognized as a major economic problem and one of the causes of environmental degradation. Increasing awareness of its negative effects has fostered a wide range of proposals to combat it by major international conservation groups and political organizations. Following the 2008 US legislation which prohibits the import of illegally harvested wood and wood products, the European Union (EU) is now discussing a legislation proposal which would ban illegal timber from the EU market. In this study we use the ICES computable general equilibrium model to estimate the reallocation of global demand and timber imports following the pending EU legislation. With this exercise our final objective is to assess the economic impacts and measure the potential emission reduction resulting from the introduction of this type of policy. Results show that while the EU ban does not seem particularly effective in reducing illegal logging activities, its main effect will be the removal of illegal logs from the international markets. In addition, the unilateral EU ban on illegal logs increases secondary wood production in illegal logging countries as their exports become relatively more competitive. Through this mechanism, part of the banned, illegal timber will re-enter the international trade flows, but it will be “hidden” as processed wood. This effect is, however, limited. Finally, given the limited effect on overall economic activity, effects on GHG emissions are also limited. Direct carbon emissions from logging activities can decrease from 2.5 to 0.6 million tons per year.
    Keywords: Forestry, Illegal Logging, International Trade, Economy and Environment, Computable General Equilibrium Models
    JEL: D58 Q23 Q56 R13
    Date: 2010–06
  4. By: Frank Ackerman, Elizabeth A. Stanton, Ramón Bueno
    Abstract: This paper describes a new model, Climate and Regional Economics of Development (CRED), which is designed to analyze the economics of climate and development choices. Its principal innovations are the treatment of global equity, calculation of the optimum interregional flows of resources, and use of McKinsey marginal abatement cost curves to project the cost of mitigation. The model shows more equitable scenarios have better climate outcomes; the challenge of climate policy is to persuade high-income countries to accept the need for both international equity and climate protection.
    Keywords: climate economics, development, global equity, abatement costs, integrated assessment models
    JEL: Q54 Q56 O13 Q52
    Date: 2010–07
  5. By: Roxana Gutierrez-Romero
    Abstract: This paper analyses the factors that give rise to the existence of the informal economy and how it evolves over time. Using an occupational-choice model the paper shows that at early stages of development, informal and formal markets coexists, but in the long-run the size of the informal economy can decline depending on the initial distribution of wealth. The model shows that the higher the initial wealth inequality the larger the size of the informal economy and the higher the wealth inequality will be in the long run. The paper calibrates the model using numerical simulations.
    Keywords: informal economy, occupational choice and inequality
    JEL: D31 K4
    Date: 2010
  6. By: Adam Gersl (Czech National Bank; Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czech Republic); Petr Jakubík (European Central Bank; Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czech Republic)
    Abstract: This paper examines procyclicality of the financial system. The introduction describes the natural and regulatory sources of procyclicality, focusing on the potential procyclical effect of the current Basel II regulatory framework for banks. It also mentions the regulatory tools for mitigating procyclical behaviour by financial institutions currently being discussed in international forums. Under certain conditions, procyclical behaviour of the banking sector can lead to an adverse feedback loop whereby banks, in response to an economic downswing, engage in deleveraging and reduce their lending to the economy in order to maintain the required capital adequacy ratio. This then further negatively affects economic output and impacts back on banks in the form of, for example, increased loan losses. In the main empirical section of the paper, this effect was simulated on the example of the Czech banking sector. The simulation results suggest that under certain assumptions the feedback loop may play an important role.
    Keywords: procyclicality; feedback loop; bank regulation; deleveragin
    JEL: G21 E44 E47
    Date: 2010–07
  7. By: Gollin, Douglas (Williams College); Zimmermann, Christian (University of Connecticut)
    Abstract: We study the impact of global climate change on the prevalence of tropical diseases using a heterogeneous agent dynamic general equilibrium model. In our framework, households can take actions (e.g., purchasing bednets or other goods) that provide partial protection from disease. However, these actions are costly and households face borrowing constraints. Parameterizing the model, we explore the impact of a worldwide temperature increase of 3° C. We find that the impact on disease prevalence and especially output should be modest and can be mitigated by improvements in protection efficacy.
    Keywords: DSGE models, climate change, tropical diseases, incomplete markets
    JEL: I1 O11 E13 E21 Q54
    Date: 2010–07
  8. By: James W. Boudreau (The University of Texas-Pan American); Vicki Knoblauch (University of Connecticut)
    Abstract: This paper studies the inefficiency of one-to-one matching markets as measured by the price of stability. We begin by providing some theoretical upper bounds on this type of inefficiency, bounds that vary with the composition of participants’ ordinal preference lists. We then turn to simulation experiments to further describe how changes in basic characteristics of agents’ preferences can increase or decrease the efficiency of stable matchings. Our results have important implications for those who seek to improve the functioning of real-world matching markets. Though it may be difficult or even impossible to completely ascertain preferences in a real-world market, it is possible to get a sense of general levels of correlation and intercorrelation from an empirical sample. Our results can then be of help to market designers, letting them know how substantial the price of stability is likely to be.
    Keywords: Price of stability, matching
    JEL: C78 D63 C63
    Date: 2010–04

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