nep-cmp New Economics Papers
on Computational Economics
Issue of 2010‒09‒25
eleven papers chosen by
Stan Miles
Thompson Rivers University

  1. Improving on Africa's roads - Modeling infrastructure investment and its effect on subsistence agriculture By Schürenberg-Frosch, Hannah
  2. Socioeconomic Impacts of Cross- Border Transport Infrastructure Development in South Asia By John Gilbert; Nilanjan Banik
  3. Structural Change in the Australian Electricity Industry During the 1990s and the Effect on Household Income Distribution By George Verikios; Xiao-guang Zhang
  4. Convergence of Income Growth Rates in Evolutionary Agent-Based Economics By Volker Nannen
  5. Nonsequential search equilibrium with search cost heterogeneity By Moraga-Gonzalez, Jose L.; Sandor, Zsolt; Wildenbees, Matthijs R.
  6. The "Social Cost of Carbon" Made Simple By Steve Newbold; Charles Griffiths; Christopher C. Moore; Ann Wolverton; Elizabeth Kopits
  7. Optimizing the charge profile: Considering users' driving profiles By Kley, Fabian; Dallinger, David; Wietschel, Martin
  8. Poverty Impact of Rising Maize Prices in Kenya By Levin, Jörgen
  9. Prices vs. Quantities with incomplete enforcement and different enforcement probabilities By Rohling, Moritz
  10. Performance evaluation using bootstrapping DEA techniques: Evidence from industry ratio analysis By Halkos, George; Tzeremes, Nickolaos
  11. Fast remote but not extreme quantiles with multiple factors. Applications to Solvency II and Enterprise Risk Management By Matthieu Chauvigny; Laurent Devineau; Stéphane Loisel; Véronique Maume-Deschamps

  1. By: Schürenberg-Frosch, Hannah
    Abstract: Investment in infrastructure is considered as a crucial prerequisite for economic development. Given the scarce resources for public investment in developing countries a detailed perspective on the effects of each form of infrastructure is needed. This paper focuses on transport infrastructure in Africa. The effects of better and longer roads are investigated in a theoretical model, an empirical setup and in a Computable General Equilibrium (CGS) model. The effects on production, consumption and income distribution are shown. Most importantly the model is used to investigate the effect of roads on the economic participation of rural households. The presented CGE model may be used as a toolkit for the investigation of different policy scenarios concerning the type and volume of investment as well as the possible financing alternatives. Robustness checks show that in order to prevent reliable quantitative results much more information is needed about the exact value of particular parameters in the model. --
    Keywords: Infrastructure,Computable General Equilibrium,Transport networks,Africa,rural development,subsistence agriculture
    JEL: O11 O55 R42
    Date: 2010
  2. By: John Gilbert; Nilanjan Banik (Asian Development Bank Institute)
    Abstract: Although the overall economic performance of economies in South Asia in recent years has been impressive, there is concern that an aging and increasingly inadequate infrastructure may limit the potential for further growth and economic development. A critical infrastructure component is the transportation network, and there are currently several transportation infrastructure projects in the South Asia Subregional Economic Cooperation (SASEC) region, connecting Nepal, eastern India, Bangladesh, and Bhutan. This paper uses computable general equilibrium (CGE) methods to address how these infrastructure developments might affect the broader economy in SASEC, and in particular impact on income distribution and poverty. The paper describes a new CGE model for South Asia, covering India, Sri Lanka, Bangladesh, Nepal, and Pakistan, which incorporates modifications to household structure in order to capture the implications of reform for changes in intra-household income. The scenarios that are considered reflect proposed investments in land transport infrastructure in the SASEC region. These should result in reductions in the land transport component of international transport margins, which vary bilaterally by commodity. We found that all SASEC economies would benefit from the reductions in terms of aggregate welfare, with the largest gains accruing to India in absolute terms, but the largest relative gains to Nepal, followed by Bangladesh and Sri Lanka when the margin reduction is prorated to intra-South Asian trade rather than just SASEC. In terms of household level distribution, the picture was mixed, with clearly pro-poor outcomes in some countries, such as Nepal, but more ambiguous impacts in others. In terms of potential adjustment costs, examination of the extent of predicted structural changes suggests that these would be minor, although somewhat more significant for the smaller economies in the region.
    Keywords: South Asia Subregional Economic Cooperation, SASEC, South Asia, computable general equilibrium, infrastructure, structural changes
    JEL: F14 F17 D58 O53
    Date: 2010
  3. By: George Verikios; Xiao-guang Zhang
    Abstract: We develop a framework for estimating the direct and indirect effects on household income of industry changes; it combines a computable general equilibrium model with a microsimulation model in a two-stage simulation procedure. We apply the framework to analysing changes in the Australian electricity industry during 1990s and their effect on household income across households. Almost all income deciles are found to have benefited from the changes but the pattern of effects meant that there was also a small increase in income inequality.
    Keywords: computable general equilibrium, electricity, household income distribution, microeconomic reform, microsimulation
    JEL: C68 C69 L94 D31
    Date: 2010–09
  4. By: Volker Nannen
    Abstract: We consider a heterogeneous agent-based economic model where economic agents have strictly bounded rationality and where income allocation strategies evolve through selective imitation. Income is calculated by a Cobb-Douglas type production function, and selection of strategies for imitation depends on the income growth rate they generate. We show that under these conditions, when an agent adopts a new strategy, the effect on its income growth rate is immediately visible to other agents, which allows a group of imitating agents to quickly adapt their strategies when needed.
    Date: 2010–09
  5. By: Moraga-Gonzalez, Jose L. (IESE Business School); Sandor, Zsolt (University of Groningen); Wildenbees, Matthijs R. (Kelly School of Business)
    Abstract: We generalize the model of Burdett and Judd (1983) to the case where an arbitrary finite number of firms sells a homogeneous good to buyers who have heterogeneous search costs. We show that a price dispersed symmetric Nash equilibrium always exists. Numerical results show that the behavior of prices with respect to the number of firms hinges upon the shape of the search cost distribution: when search costs are relatively concentrated (dispersed), entry of firms leads to higher (lower) average prices.
    Keywords: nonsequential search; oligopoly; arbitrary search cost distributions;
    JEL: C72 D43
    Date: 2010–07–13
  6. By: Steve Newbold; Charles Griffiths; Christopher C. Moore; Ann Wolverton; Elizabeth Kopits
    Abstract: The “social cost of carbon” (SCC) is the present value of the future stream of damages from one additional ton of carbon emissions in a particular year. This paper develops a simple model for calculating the SCC and compares estimates of the SCC under certainty and uncertainty. Our model includes the key ingredients shared by several of the more complex integrated assessment models in the climate economics literature, but is designed to be more transparent and easier to use by decision-makers and non-specialists. We conduct a series of sensitivity analyses to examine the influences of several key parameters in the deterministic case. We also conduct a formal uncertainty analysis using Monte Carlo simulation, which shows that the certainty-equivalent SCC can be substantially larger than the expected value of the SCC. We explain that this difference arises due to the combined effects of uncertainty and risk aversion. Finally, we compare the present value of benefits estimated using the SCC to the compensating variation of consumption in the initial period for a wide range of hypothetical emission reduction policies.
    Keywords: climate change, social cost of carbon, integrated assessment model
    JEL: Q54
    Date: 2010–08
  7. By: Kley, Fabian; Dallinger, David; Wietschel, Martin
    Abstract: PHEVs are discussed controversially. On the one hand, the evolutionary approach of a hybrid vehicle helps the consumer to adopt to electric driving, using the range extender when driving longer distances. On the other hand, PHEVs have a more complex propulsion system and a potentially low emission impact due to a low electric driving share. These factors, however, strongly depend on the consumers' driving and charging behavior. Therefore, this paper simulates realistic driving based on the national German travel survey. Firstly, battery profiles are modeled using further information about parking locations, charging scenarios, as well as different battery sizes. Secondly, total costs of different alternative vehicles are calculated and minimized varying the battery size. According to the simulation, PHEVs are less expensive and thus important for market adoption. High electric driving shares of more than 80% allow fair emission reductions. And for the few longer trips, PHEVs can use the fall-back option of the internal combustion engine. PHEVs thus do not require an oversized battery and are thus more economical. In the early market, PHEVs will be equipped with smaller batteries; and with higher market share, require customization of the battery size for different customer segments and vehicle types. --
    Date: 2010
  8. By: Levin, Jörgen (Department of Business, Economics, Statistics and Informatics)
    Abstract: The recent hike in food prices has been of great concern to policymakers, international organisations and donor agencies. In this paper we discuss, both from a partial and general equilibrium perspective, the impact of the recent price increase on maize on Kenyan households. Simulating a 100% increase in maize prices, we find that the headcount ratio in urban areas increased by 3-4 percentage unit points, depending on the size of windfall gain to producers. Based on the assumption that the price shock is passed through in total to the farmers, food poverty in the rural areas could be reduced by almost 14%. If incomes are not passed through, rural food poverty would increase quite significantly in some provinces. It is the poorest of the poor in both urban and rural areas who are most adversely affected. Policy reforms, which would reduce marketing margins and fertiliser prices, would be important factors in promoting a positive impact on performance in the maize sector. The regional maize trade within East Africa seems to have a role to play, and exploring the impact of total integration of the maize markets could be a topic of further research.
    Keywords: Food crisis; maize; Kenya; poverty; distribution; net benefit ratio; CGE
    JEL: O12 O18 Q11 Q18
    Date: 2010–09–10
  9. By: Rohling, Moritz
    Abstract: Regulating inter-country externalities, like climate change, raises various enforcement problems. It is often argued that international pricebased regulations (e.g. emission taxes) are more difficult to enforce than quantity-based regulations (e.g. tradable pollution permits). In this paper, we analyze the relative performance of price-based and quantity-based instruments for cases where costs and benefits are uncertain and enforcement of quantity regimes is stricter than for price-based regimes. We show that under these conditions, instrument choice solely based on the relative slopes of the marginal costs can be inefficient. If enforcement probabilities differ, rational policy choice should also take into account the level of the marginal benefit curve, as well as institutional parameters. In contrast to earlier analyses on Prices vs. Quantities, we find that the difference in welfare for both policy instruments also depends on the variance of the marginal abatement costs. Furthermore, numerical simulations of our stylized model suggest that, for climate policies, quantity-regulations might well be preferable to price-based approaches after all. --
    Keywords: market-based instruments,incomplete enforcement,environmental regulation,uncertainty
    JEL: D8 L51 K42 Q58
    Date: 2010
  10. By: Halkos, George; Tzeremes, Nickolaos
    Abstract: In Data Envelopment Analysis (DEA) context financial data/ ratios have been used in order to produce a unified measure of performance metric. However, several scholars have indicated that the inclusion of financial ratios create biased efficiency estimates with implications on firms’ and industries’ performance evaluation. There have been several DEA formulations and techniques dealing with this problem including sensitivity analysis, Prior-Ratio-Analysis and DEA/ output–input ratio analysis for the assessment of the efficiency and ranking of the examined units. In addition to these computational approaches this paper in order to overcome these problems applies bootstrap techniques. Moreover it provides an application evaluating the performance of 23 Greek manufacturing sectors with the use of financial data. The results reveal that in the first stage of our sensitivity analysis the efficiencies obtained are biased. However, after applying the bootstrap techniques the sensitivity analysis reveals that the efficiency scores have been significantly improved.
    Keywords: Performance measurement; Data Envelopment Analysis; Financial ratios; Bootstrap; Bias correction
    JEL: C14 C15 C67
    Date: 2010
  11. By: Matthieu Chauvigny (R&D Milliman - Milliman); Laurent Devineau (R&D Milliman - Milliman, SAF - Laboratoire de Sciences Actuarielle et Financière - Université Claude Bernard - Lyon I : EA2429); Stéphane Loisel (SAF - Laboratoire de Sciences Actuarielle et Financière - Université Claude Bernard - Lyon I : EA2429); Véronique Maume-Deschamps (SAF - Laboratoire de Sciences Actuarielle et Financière - Université Claude Bernard - Lyon I : EA2429)
    Abstract: For operational purposes, in Enterprise Risk Management or in insurance for example, it may be important to estimate remote (but not extreme) quantiles of some function ƒ of some random vector. The call to ƒ may be time- and resource-consuming so that one aims at reducing as much as possible the number of calls to ƒ. In this paper, we propose some ways to address this problem of general interest. We then numerically analyze the performance of the method on insurance and Enterprise Risk Management real-world case studies.
    Date: 2010–09

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