New Economics Papers
on Computational Economics
Issue of 2012‒06‒25
fifteen papers chosen by

  1. Kullback-Leibler Simplex By Kangpenkae, Popon
  2. A Numerical Approach to the Contract Theory: the Case of Moral Hazard By Hideo Hashimoto; Kojun Hamada; Nobuhiro Hosoe
  3. Modeling the Welfare Impacts of Agricultural Policies in Developing Countries By Jonasson, Erik; Filipski, Mateusz; Brooks, Jonathan; Taylor, J. Edward
  4. ILS-ESP: An efficient, simple, and parameter-free algorithm for solving the permutation flow-shop problem By Angel A. Juan; Helena Ramalhinho-Lourenço; Manuel Mateo; Quim Castellà; Barry B. Barrios
  5. Effects of Increasing Agricultural Productivity: A Computable General Equilibrium Analysis for Sri Lanka By Gunawardena, Aruni
  6. Tax Morale and Tax Evasion: Social Preferences and Bounded Rationality By Zsombor Z. Méder; András Simonovits; János Vincze
  7. Efficient computation of the cdf of the maximum distance between Brownian bridge and its concave majorant. By Karim, Filali; Balabdaoui, Fadoua
  8. Technology Spillovers Embodied in International Trade: Intertemporal, regional and sectoral effects in a global CGE By Enrica De Cian; Ramiro Parrado
  10. Turkish treasury simulation model for debt strategy analysis By Balibek, Emre; Memis, Hamdi Alper
  11. Impact of climate change on wheat market and food security in Sudan: stochastic approach and CGE model and CGE Model By Sassi, Maria; Cardaci, Alberto
  12. Economic effects of differentiated climate action By Leszek Kąsek; Olga Kiuila; Krzysztof Wójtowicz; Tomasz Żylicz
  13. Upgrading irrigation infrastructure in the Murray Darling Basin: is it worth it? By Glyn Wittwer; Janine Dixon
  14. Agent’s Heterogeneity and its Role in Changing Land Use Patterns: An Agent Based Model of Potomac River Basin By Arbab, Nazia N.; Collins, Dr Alan R.
  15. A Comparative Analysis of Funding Schemes for Public Infrastructure Spending in Quebec By Dorothée Boccanfuso; Marcelin Joanis; Patrick Richard; Luc Savard

  1. By: Kangpenkae, Popon
    Abstract: This technical reference presents the functional structure and the algorithmic implementation of KL (Kullback-Leibler) simplex. It details the simplex approximation and fusion. The KL simplex is fundamental, robust, adaptive an informatics agent for computational research in economics, finance, game and mechanism. From this perspective the study provides comprehensive results to facilitate future work in such areas.
    Keywords: KL divergence; second-order perceptron; informatics agent; simplex projection and fusion; computational economics-game-finance-mechanism
    JEL: C63 C61
    Date: 2012–06
  2. By: Hideo Hashimoto (Osaka University); Kojun Hamada (Niigata University); Nobuhiro Hosoe (National Graduate Institute for Policy Studies)
    Abstract: We develop a few numerical models to examine the moral hazard problems exemplified by Itoh (2003, Ch. 4), following our earlier study (Hashimoto et al. (2011)) on the adverse selection problems. To this end, we first model a risk averse or risk neutral entrepreneur who selects his action among two options (e.g., low efforts and high efforts). The results of the models, whose computer programs are explained in detail for novice modelers, numerically illustrate the essence of the contract theory analysis. Second, the similar models, applied to the case with three effort level options, are built with and without the assumptions often employed to simplify the theoretical analysis. Through these exercises the significance of such assumptions in the contract theory analysis would be understood clearly.
    Date: 2012–06
  3. By: Jonasson, Erik; Filipski, Mateusz; Brooks, Jonathan; Taylor, J. Edward
    Abstract: This paper presents a new model which incorporates features of developing country agriculture that may be critical in shaping the welfare outcomes of alternative agricultural policies. The model features heterogeneous households linked through markets in a rural economy-wide structure, with endogenous market participation for farmers facing transactions costs. The model is used for policy simulations, including market price support, production subsidies, input subsidies, transaction cost removal, and unconditional cash transfers. Applications for six countries highlight the diversity of potential impacts of such policies. The simulation results suggest that there are circumstances under which some market interventions, such as input subsidies, may be only slightly less efficient at transferring incomes than direct payments.
    Keywords: agricultural household model, agricultural policy, simulation, transaction costs, Agricultural and Food Policy, Consumer/Household Economics, O12, O13, Q12, Q18,
    Date: 2012–05
  4. By: Angel A. Juan; Helena Ramalhinho-Lourenço; Manuel Mateo; Quim Castellà; Barry B. Barrios
    Abstract: From a managerial point of view, the more effcient, simple, and parameter-free (ESP) an algorithm is, the more likely it will be used in practice for solving real-life problems. Following this principle, an ESP algorithm for solving the Permutation Flowshop Sequencing Problem (PFSP) is proposed in this article. Using an Iterated Local Search (ILS) framework, the so-called ILS-ESP algorithm is able to compete in performance with other well-known ILS-based approaches, which are considered among the most effcient algorithms for the PFSP. However, while other similar approaches still employ several parameters that can affect their performance if not properly chosen, our algorithm does not require any particular fine-tuning process since it uses basic "common sense" rules for the local search, perturbation, and acceptance criterion stages of the ILS metaheuristic. Our approach defines a new operator for the ILS perturbation process, a new acceptance criterion based on extremely simple and transparent rules, and a biased randomization process of the initial solution to randomly generate different alternative initial solutions of similar quality -which is attained by applying a biased randomization to a classical PFSP heuristic. This diversification of the initial solution aims at avoiding poorly designed starting points and, thus, allows the methodology to take advantage of current trends in parallel and distributed computing. A set of extensive tests, based on literature benchmarks, has been carried out in order to validate our algorithm and compare it against other approaches. These tests show that our parameter-free algorithm is able to compete with state-of-the-art metaheuristics for the PFSP. Also, the experiments show that, when using parallel computing, it is possible to improve the top ILS-based metaheuristic by just incorporating to it our biased randomization process with a high-quality pseudo-random number generator.
    Keywords: Flow-Shop Problem, Scheduling, Randomized Algorithms, Iterated Local Search, Metaheuristics, GRASP
    JEL: C63 M11
    Date: 2012–02
  5. By: Gunawardena, Aruni
    Abstract: This paper provides a quantitative assessment of the likely economy-wide impacts of agricultural productivity improvements in Sri Lanka. A static multi sector Computable General Equilibrium (CGE) model of the Sri Lankan economy using the input-output table for year 2000 is employed highlighting the agricultural sector and its interactions with other production sectors in the economy. The results indicate that increasing agricultural productivity leads to positive economic benefits. However, productivity improvements would lead to reduction in agricultural employment, which in turn may affect the real income of households in agricultural provinces in the short run.
    Keywords: Multi sector CGE model, productivity, Productivity Analysis,
    Date: 2012–02
  6. By: Zsombor Z. Méder (Maastricht University, Department of Economics, The Netherlands); András Simonovits; János Vincze
    Abstract: We study a family of models of tax evasion, where a flat-rate tax finances only the provision of public goods, neglecting audits and wage differences. We focus on the comparison of two modeling approaches. The first is based on optimizing agents, who are endowed with social preferences, their utility being the sum of private consumption and moral utility. The second approach involves agents acting according to simple heuristics. We find that while we encounter the traditionally shaped Laffer-curve in the optimizing model, the heuristics models exhibit (linearly) increasing Laffer-curves. This difference is related to a peculiar type of behavior emerging within the heuristics based approach: a number of agents lurk in a moral state of limbo, alternating between altruism and selfishness.
    Keywords: tax evasion, tax morale, agent-based simulation
    JEL: H26
    Date: 2012–06–08
  7. By: Karim, Filali; Balabdaoui, Fadoua
    Abstract: In this paper, we describe two computational methods for calculating the cumulative distribution function and the upper quantiles of the maximal difference between a Brownian bridge and its concave majorant. The first method has two different variants that are both based on a Monte Carlo approach, whereas the second uses the Gaver–Stehfest (GS) algorithm for the numerical inversion of the Laplace transform. If the former method is straightforward to implement, it is very much outperformed by the GS algorithm, which provides a very accurate approximation of the cumulative distribution as well as its upper quantiles. Our numerical work has a direct application in statistics: the maximal difference between a Brownian bridge and its concave majorant arises in connection with a nonparametric test for monotonicity of a density or regression curve on [0,1]. Our results can be used to construct very accurate rejection region for this test at a given asymptotic level.
    Keywords: Monte Carlo; Monotonicity; Gaver–Stehfest algorithm; concave majorant; Brownian bridge;
    JEL: C15
    Date: 2012
  8. By: Enrica De Cian (Fondazione Eni Enrico Mattei (FEEM), and Centro Euro-mediterraneo per i Cambiamenti Climatici (CMCC)); Ramiro Parrado (Fondazione Eni Enrico Mattei (FEEM), Centro Euro-mediterraneo per i Cambiamenti Climatici (CMCC) and Ca’ Foscari University of Venice)
    Abstract: This paper uses a dynamic CGE model to assess the intertemporal and spatial dimension of technology spillovers embodied in international trade within a climate and trade policy framework. Three are the main contributions of the study. First, to include endogenous factor-biased technical change based on trade flows in a CGE model, particularly for energy and capital. Second, to analyse the implications of specific spillovers embodied in trade of capital goods (machinery and equipment), and third, to highlight the implications of accounting for indirect effects induced by spillovers. We find that explicitly modelling trade spillovers reveals significant effects thanks to the transmission mechanisms underlying imports of capital commodities. We then assess the net contribution of modelling trade spillovers within three policy scenarios. The aggregated net effects of spillovers are rather small confirming findings from previous studies. However, there are important international and intersectoral redistribution effects due to technology transfers represented as embodied spillovers.
    Keywords: Computable General Equilibrium Models, Climate Change, Economic Growth, Technological Spillovers
    JEL: C68 E27 O12 Q54 Q56 O33
    Date: 2012–05
  9. By: Yang, Jun; Zhang, Wei; Tokgoz, Simla
    Abstract: There has been contentious debate surrounding the issue of undervaluation of the Chinese Renminbi, with continuous international political pressure on China to appreciate its currency and the Chinese government resisting significant changes in its policy. A key question underlining the debate is whether a Renminbi appreciation would deliver substantial gains for exports and employment as the United States has argued or a significant slowdown of Chinese economy as feared by the Chinese government, and if so to what extent. This paper analyzes the ex-ante, short-term impacts of the Chinese Renminbi appreciation on the Chinese and world economies using the novel approach of modeling nominal exchange rate adjustment in the Global Trade Analysis Project, a global computable general equilibrium model. Scenario results show that the Chinese economy will be affected negatively, with lower real gross domestic product, lower employment rates, and a decline in the trade surplus. Chinese currency appreciation has a positive impact on the GDP of the major countries and regions, but by a small margin. With a higher Chinese exchange rate, trade balances for other trading partner countries, with the exception of the United States, improve.
    Keywords: China, computable general equilibrium model, economic impacts, exchange rate, Renminbi appreciation, Financial Economics, International Relations/Trade,
    Date: 2012–06–07
  10. By: Balibek, Emre; Memis, Hamdi Alper
    Abstract: Governments raise funds to meet their financing needs using a range of fixed income securities and loans with different maturities, interest rates, and exchange rate structures. Public debt managers need to consider various policy objectives when deciding on the structure of the public liability portfolio. This paper describes a simulation model developed at the Turkish Treasury to assist the decision-making process in debt strategy formulation. The model is used to analyze the medium and long-term consequences of alternative debt management strategies in terms of cost and risk characteristics, and provides key inputs to decision making.
    Keywords: Debt Markets,Emerging Markets,Economic Theory&Research,External Debt,Banks&Banking Reform
    Date: 2012–06–01
  11. By: Sassi, Maria; Cardaci, Alberto
    Abstract: The paper aims at analysing the impact of the likely change in rainfall on food availability and access to food in Sudan. The empirical investigation is based on an integrated approach consisting of a stochastic method and CGE model. The former provides the likely changes in sorghum, millet and wheat productivity and their probability of occurrence according to rainfall predictions based on historical data. These results are at the basis of the shocks simulated in a standard CGE model augmented with a stochastic component. Achievements underline the negative impact on the two dimensions of food security taken into consideration, mainly due to a reduction in cereal supply, a marked cereal inflation pressure and income contraction; the grater negative effect on the poorest households; and a deterioration of the economic performance of the country. In this context, the paper stresses a strong interconnection among climate change, poverty and food insecurity and thus the need for an integrated policy-making approach.
    Keywords: climate change, food security, stochastic approach, cge, sudan, Environmental Economics and Policy, C68, Q18, Q54,
    Date: 2012
  12. By: Leszek Kąsek (World Bank); Olga Kiuila (University of Warsaw, Faculty of Economic Sciences); Krzysztof Wójtowicz (UPolish Ministry of Economy, Strategy and Analyses Department); Tomasz Żylicz (University of Warsaw, Faculty of Economic Sciences)
    Abstract: We analyze existing definitions of carbon leakage and provide a new rigorous one. This is then tested using computable general equilibrium analysis for unilateral carbon dioxide abatement programs in the EU. Our model of the global economy is disaggregated into three regions. The analysis includes a decomposition of change in carbon emission. While some anti-leakage measures reduce carbon leakage significantly, some of them are less effective. We identified a list of parameters which affect not only the magnitude but also the sign of carbon leakage rate. Manipulating with elasticities of substitution in production function suggests that in reaction to the unilateral action of the EU, the other regions may both increase or decrease their carbon emissions. Even though we are positive about computable general equilibrium models’ application in this policy area, their policy simulations cannot be directly treated as policy recommendations without a careful validation of their assumptions.
    Keywords: CO2 abatement, CGE models, EU climate policy, decomposition analysis
    JEL: C68 Q54 F47 Q48
    Date: 2012
  13. By: Glyn Wittwer; Janine Dixon
    Abstract: Infrastructure upgrades appear superficially to be a politically acceptable way of increasing environmental flows in the Murray-Darling Basin. From an economic perspective, their costs and benefits should be compared with other policy instruments. We do so using TERM-H2O, a dynamic regional CGE model with considerable basin detail. Voluntary and fully compensated buybacks are much less costly than upgrades as a means of obtaining a target volume of environmental water. Even during drought, when highly secure water created by infrastructure upgrades is more valuable, the upgrades remain too costly. As an instrument of regional economic management, infrastructure upgrades are inferior to public spending on health, education and other services in the basin. For each job created from upgrades, the money spent on services could create between three and four jobs in the basin.
    Keywords: CGE modelling, water buybacks, regional economies
    JEL: C54 Q11 Q15
    Date: 2012–06
  14. By: Arbab, Nazia N.; Collins, Dr Alan R.
    Keywords: Land Economics/Use, Resource /Energy Economics and Policy,
    Date: 2012
  15. By: Dorothée Boccanfuso (Département d’économique and GRÉDI, Université de Sherbrooke); Marcelin Joanis (Département d’économique and GRÉDI, Université de Sherbrooke); Patrick Richard (Département d’économique and GRÉDI, Université de Sherbrooke); Luc Savard (Département d’économique and GRÉDI, Université de Sherbrooke)
    Abstract: The economic literature has been investigating the positive relation between public infrastructure spending and the productivity of the private sector since Munnell (1992). We have introduced this relationship into a recursive dynamic computable general equilibrium model of the Quebec economy to investigate various funding schemes to scale up infrastructure spending in the province. We draw our assumptions from Estache et al. (2010) combined with sectoral elasticity parameters. We conduct a comparative analysis where the funding comes from debt alone, and debt with sales tax, income tax and business tax. Our main finding is that the income tax seems to produce the most positive effects and the businesses tax the most negative effects, though differences are small.
    Keywords: CGE model, infrastructure, productivity
    JEL: D58 H54 H63 O47
    Date: 2012–06

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