nep-cmp New Economics Papers
on Computational Economics
Issue of 2011‒02‒19
eleven papers chosen by
Stan Miles
Thompson Rivers University

  1. Can the removal of VAT Exemptions support the Poor? The Case of Niger By Dorothée Boccanfuso; Céline de Quatrebarbes; Luc Savard
  2. Education, police et criminalité : une étude de cas du Minas Gerais à l'aide d'un modèle d'équilibre général calculable By Frédéric Puech
  3. Modelling asset correlations: A nonparametric approach By Aslanidis, Nektarios; Casas, Isabel
  4. Intergenerational transmission of skills during childhood and optimal public policy By Casarico, Alessandra; Micheletto, Luca; Sommacal, Alessandro
  5. Trade and Skills in Uruguay: Long Term Skill Requirements By Rossana Patrón; Inés Terra
  6. Liquidity requirements and payment delays - participant type dependent preferences By Christian Schulz
  7. Redistribution, Insurance and Incentives to Work in Latin American Pension Programs By Alvaro Forteza; Guzmán Ourens
  8. The sensitivity of the Scaled Model of Error with respect to the choice of the correlation parameters: A simulation study By Rebecca Graziani; Nico Keilman
  9. Financial Fragility in a General Equilibrium Model: the Brazilian case By Benjamin M. Tabak; Daniel O. Cajueiro; Dimas M. Fazio
  10. The computation of Greeks with multilevel Monte Carlo By Sylvestre Burgos; M. B. Giles
  11. Efficient Firm Dynamics in a Frictional Labor Market By Leo Kaas; Philipp Kircher

  1. By: Dorothée Boccanfuso (GREDI, Department of Economics Business Faculty Université de Sherbrooke); Céline de Quatrebarbes (CERDI, Université d'Auvergne Clermont 1); Luc Savard (GREDI, Department of Economics Business Faculty Université de Sherbrooke)
    Abstract: In order to have the public funds necessary for its development, Niger is examining the possibility of expanding its VAT tax base to exempted goods and basic food products. This proposal has prompted violent opposition leading to the question of the social impacts of taxation. The first micro-macro computable general equilibrium model of Niger's actual economy has been developed. This model allows analysis of the social impact and distributional analysis of the following VAT structures: a pure VAT structure, a structure maintaining certain exemptions, and a multiple-rate VAT structure. The model’s results shows that although restoring the VAT rate would be socially costly compared to the initial situation, the distributional impact of the VAT differs according to the system implemented in the country. Maintaining VAT exemptions in food crop agriculture sectors associated with a tax base expansion in the remaining sectors will increase public revenue while taking into account the national goal of poverty reduction. The net social impact of exoneration depends on the economic structure of the concerned sector. If the national goal is the end of exemption, the model shows that applying a pure VAT conforming to the theory is preferable in terms of economic growth whereas applying a reduced-rate on food crop agriculture lightens the social impact of the end of exemptions compared to a single rate.
    Keywords: Computable general equilibrium model, micro-simulation, Value Added Tax, exemptions, distributional analysis, Niger
    JEL: D58 E62 H22 I32
    Date: 2011–02–13
    URL: http://d.repec.org/n?u=RePEc:shr:wpaper:11-04&r=cmp
  2. By: Frédéric Puech (CERDI - Centre d'études et de recherches sur le developpement international - CNRS : UMR6587 - Université d'Auvergne - Clermont-Ferrand I)
    Abstract: The aim of this paper is to study the trade-off between public expenditures in education and police in the framework of the fight against violent crime. The study uses a computable general equilibrium model (CGE) built upon the economy of Minas Gerais, a Brazilian state. Main results suggest a comparable reducing effect of both type of expenditures on crime, though this effect is strongly dependant on other simultaneous social policies.
    Keywords: crime;CGE models;Brasil
    Date: 2011–02–09
    URL: http://d.repec.org/n?u=RePEc:hal:wpaper:halshs-00564578&r=cmp
  3. By: Aslanidis, Nektarios; Casas, Isabel
    Abstract: This article proposes a time-varying nonparametric estimator and a time-varying semiparametric estimator of the correlation matrix. We discuss representation, estimation based on kernel smoothing and inference. An extensive Monte Carlo simulation study is performed to compare the semiparametric and nonparametric models with the DCC speci fication. Our bivariate simulation results show that the semiparametric and nonparametric models are best in DGPs with gradual changes or structural breaks in correlations. However, in DGPs with rapid changes or constancy in correlations the DCC delivers the best outcome. Moreover, in multivariate simulations the semiparametric and nonparametric models fare the best in DGPs with substantial time-variability in correlations, while when allowing for little variability in the correlations the DCC is the dominant speci fication. The methodologies are illustrated by estimating the correlations for two interesting portfolios. The rst portfolio consists of the equity sectors SPDRs and the S&P 500 composite, while the second one contains major currencies that are actively traded in the foreign exchange market. Portfolio evaluation results show that the nonparametric estimator generally dominates its competitors, with a statistically significant lower portfolio variance.
    Keywords: Portfolio Evaluation; DCC; Local Linear Estimator; Nonparametric Correlations; Semiparametric Conditional Correlation Model
    Date: 2011–01
    URL: http://d.repec.org/n?u=RePEc:syd:wpaper:2123/7171&r=cmp
  4. By: Casarico, Alessandra (Bocconi University); Micheletto, Luca (Uppsala Center for Fiscal Studies); Sommacal, Alessandro (Faculty of Economics, University of Verona)
    Abstract: The paper characterizes the optimal tax policy and the optimal quality of day care services in a OLG model with warm-glow altruism where parental choices over child care arrangements affect the probability that the child becomes a high-skilled adult in a type-specific way. With respect to previous contributions, optimal tax formulas include type-specific Pigouvian terms which correct for the intergenerational externality in human capital accumulation. Our numerical simulations suggest that a public policy that disregards the effects of parental time on children's human capital entails a welfare loss that ranges from 0:2% to 5:7% of aggregate consumption.
    Keywords: optimal taxation; day care quality; intergenerational transmission of skills; early childhood environment; warm-glow
    JEL: H21 H23 J13 J22 J24
    Date: 2011–02–04
    URL: http://d.repec.org/n?u=RePEc:hhs:uufswp:2011_003&r=cmp
  5. By: Rossana Patrón (Departamento de Economía, Facultad de Ciencias Sociales, Universidad de la República); Inés Terra (Departamento de Economía, Facultad de Ciencias Sociales, Universidad de la República)
    Abstract: The paper discusses the links between skill requirements in the labour market and trade patterns using a CGE applied on the SAM 2005 for Uruguay. The results for alternative scenarios in the long term show that, the wage gap would widen should the pattern of trade growth follow the current trend; however, an enhanced demand of commodities would favour a reduction in the wage gap. The exercises provide insights on the economy-wide effects in the long term of the interaction of trade and accumulation of skills, and thus on the role of the current policy of development of human resources.
    Keywords: Trade, Skills.
    JEL: F16 F17
    Date: 2010–06
    URL: http://d.repec.org/n?u=RePEc:ude:wpaper:0810&r=cmp
  6. By: Christian Schulz (European Central Bank, Kaiserstrasse 29, D-60311 Frankfurt am Main, Germany.)
    Abstract: The paper presents an analysis of the trade-offs of participants of different type between payment delay and liquidity requirement on the basis of synthetically generated data. The generation of the synthetic transaction data set for a simple RTGS system is described and calibrated using real world parameters. The payment system is simulated for various liquidity levels and it is shown that participants of different size in terms of transaction volume and value will have different optimal liquidity requirements, as the payment delays they face for each liquidity level will be different. This is shown using indifference curves between payment delay and liquidity requirements. JEL Classification: C15, C5, E58, L14, L41, L51.
    Keywords: Payment system, simulation, data generation, competition, oversight.
    Date: 2011–02
    URL: http://d.repec.org/n?u=RePEc:ecb:ecbwps:20111291&r=cmp
  7. By: Alvaro Forteza (Departamento de Economía, Facultad de Ciencias Sociales, Universidad de la República); Guzmán Ourens (Departamento de Economía, Facultad de Ciencias Sociales, Universidad de la República)
    Abstract: We present a new database of social security indicators for eleven Latin American countries designed to show how much they promise to pay in return to contributions. The indicators are based on micro-simulations according to existing norms. Our results indicate that most programs are progressive. In most programs, retirement ages do not have a sizeable impact on the rates of return, given the length of service. The length of service has a strong impact on the expected returns to contributions, mostly due to vesting period conditions. Because of this, several pension programs in Latin America may be exacerbating income risk.
    Keywords: Latin America, Social Security, Internal Rate of Return.
    JEL: H55 J14 J26
    Date: 2010–10
    URL: http://d.repec.org/n?u=RePEc:ude:wpaper:1810&r=cmp
  8. By: Rebecca Graziani; Nico Keilman
    Abstract: In this paper we investigate the sensitivity of stochastic population forecasts produced by means of the Scaled Model of Error with respect to the choice of the correlation parameters. In particular, we evaluate the impact that a change in the specification of the correlation of the age-specific fertility forecast error increments across time and age and of the correlation of the age-specific mortality forecast error increments across time, age and sex has on the forecasts of the Total Fertility Rate and of the Male and Female Life Expectancies respectively. In our opinion a sensitivity analysis of this kind is extremely useful, since up to now the relevance and the impact of the choice of the Scaled Model of Error input parameters has not be discussed in detail. Such analysis will provide users with a better understanding of the model itself.
    Keywords: population forecasts, Scaled Model of Error, sensitivity analysis
    Date: 2011–01
    URL: http://d.repec.org/n?u=RePEc:don:donwpa:037&r=cmp
  9. By: Benjamin M. Tabak; Daniel O. Cajueiro; Dimas M. Fazio
    Abstract: This paper employs a general equilibrium approach to model the Brazilian financial system. We show that the model is able to replicate the main characteristics of the data and to predict short-term trends. The model is calibrated for the 2002-2006 period. Empirical results suggest that the financial system is improving in terms of financial stability over time. Furthermore, the model has been proven useful to model the Brazilian banking system and could be employed to evaluate the impact of changes in financial regulation on the banking system.
    Date: 2010–12
    URL: http://d.repec.org/n?u=RePEc:bcb:wpaper:229&r=cmp
  10. By: Sylvestre Burgos; M. B. Giles
    Abstract: We study the use of the multilevel Monte Carlo technique in the context of the calculation of Greeks. The pathwise sensitivity analysis differentiates the path evolution and reduces the payoff's smoothness. This leads to new challenges: the inapplicability of pathwise sensitivities to non-Lipschitz payoffs often makes the use of naive algorithms impossible. These challenges can be addressed in three different ways: payoff smoothing using conditional expectations of the payoff before maturity; approximating the previous technique with path splitting for the final timestep; using of a hybrid combination of pathwise sensitivity and the Likelihood Ratio Method. We investigate the strengths and weaknesses of these alternatives in different multilevel Monte Carlo settings.
    Date: 2011–02
    URL: http://d.repec.org/n?u=RePEc:arx:papers:1102.1348&r=cmp
  11. By: Leo Kaas (Department of Economics, University of Konstanz, Germany); Philipp Kircher (Department of Economics, London School of Economics and University of Pennsylvania, USA)
    Abstract: The introduction of firm size into labor search models raises the question how wages are set when average and marginal product differ. We develop and analyze an alternative to the existing bargaining framework: Firms compete for labor by publicly posting long-term contracts. In such a competitive search setting, firms achieve faster growth not only by posting more vacancies, but also by offering higher lifetime wages that attract more workers which allows to fill vacancies with higher probability, consistent with empirical regularities.The model also captures several other observations about firm size, job flows, and pay. In contrast to bargaining models, efficiency obtains on all margins of job creation and destruction, both with idiosyncratic and aggregate shocks. The planner solution allows a tractable characterization which is useful for computational applications.
    Keywords: Labor market search, multi-worker firms, job creation and job destruction
    JEL: E24 J64 L11
    Date: 2011–01–20
    URL: http://d.repec.org/n?u=RePEc:knz:dpteco:1101&r=cmp

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