nep-cmp New Economics Papers
on Computational Economics
Issue of 2014‒06‒14
twelve papers chosen by
Stan Miles
Thompson Rivers University

  1. Simulating long term effects of policies in the agrifood sector: requirements, challenges and recommendations By Axel Tonini; Jerzy Michalek; Thomas Fellmann; Robert M'baretk; Jacques Delincé; George Philippidis; Maciej Bukowski; Piero Conforti; Alexandre Gohin; Andrey Krasovskii; Hans Van Meijl; Dominique Van Der Mensbrugghe; Janos Varga; Michael Wickens; Heinz-Peter Witzke; Geert Woltjer
  2. On the iterative plug-in algorithm for estimating diurnal patterns of financial trade durations By Yuanhua Feng; Sarah Forstinger; Christian Peitz
  3. International Commodity Prices and Inequality in Indonesia By Arief Anshory Yusuf
  4. How diverse can spatial measures of cultural diversity be? Results from Monte Carlo simulations of an agent-based model By Daniel Arribas-Bel; Peter Nijkamp; Jacques Poot
  5. Trading volume and market efficiency: an Agent Based Model with heterogenous knowledge about fundamentals By Vivien Lespagnol; Juliette Rouchier
  6. Agent-Based Computational Models - A Formal Heuristic for Institutionalist Pattern Modelling? By Gräbner, Claudius
  7. Multilevel path simulation for weak approximation schemes: myth or reality By Denis Belomestny; Tigran Nagapetyan; Vladimir Shiryaev
  8. A Branch-and-Price-and-Cut Approach for Sustainable Crop Rotation Planning By Alfandari, Laurent; Plateau, Agnès; Scheplerc, Xavier
  9. The environmental Kuznets curve in a public spending model of economic growth By Diallo, Ibrahima Amadou
  10. Evolution of outpatient healthcare expenditure due to ageing in 2030, a dynamic micro-simulation model for France By Grégoire De Lagasnerie; Charlotte Geay; Makram Larguem
  11. Comparing numerical methods for solving the competitive storage model By Christophe Gouel
  12. Assessing the impact of introducing an ACE regime: A behavioural corporate microsimulation analysis for Germany By Finke, Katharina; Heckemeyer, Jost H.; Spengel, Christoph

  1. By: Axel Tonini (Agricultural Economics Research Institue, Wageningen UR); Jerzy Michalek (Agricultural Economist, Senior Consultant); Thomas Fellmann (Institute for Prospective Technological Studies of the JRC); Robert M'baretk (Institute for Prospective Technological Studies of the JRC); Jacques Delincé (Institute for Prospective Technological Studies of the JRC); George Philippidis (Institute for Prospective Technological Studies of the JRC); Maciej Bukowski (The Institute for Structural Research); Piero Conforti (Agricultural Development Economics Division, Global Perspective Studies Team, Food and Agriculture Organization of the United Nations); Alexandre Gohin (Structures et Marchés Agricoles, Ressources et Territoires, INRA); Andrey Krasovskii (International Institute for Applied Systems Analysis); Hans Van Meijl (Wageningen University and Research Center); Dominique Van Der Mensbrugghe (Agricultural Development Economics Division, Global Perspective Studies Team, Food and Agriculture Organization of the United Nations); Janos Varga (Directorate General for Economic and Financial Affairs (DG ECFIN), European Comission); Michael Wickens (University of York); Heinz-Peter Witzke (European Centre for Agricultural, Regional and Environmental Policy Resarch); Geert Woltjer (Wageningen University and Research Center)
    Abstract: Food security, natural resources and climate change related questions focusing on a longer time horizon (2050+) are gaining importance. To assess the requirements and challenges entailed with the simulation of long-term issues in the agri-food sector the JRC-IPTS carried out the project “Methodological requirements of a modelling tool for simulation of long-term (2050) effects of policies affecting the agricultural and food sectorsâ€, involving experts for different methodologies. Partial and General Equilibrium models are covered as well as Dynamic Stochastic General Equilibrium (DSGE) and Optimal Control Theory (OCT) approaches are taken into account, evaluated and discussed.[résumé des auteurs]
    Keywords: secteur agroalimentairesécurité alimentaire, changement climatiqueressource naturelle, évolution à long termeméthode de simulation, modèle
    Date: 2013
  2. By: Yuanhua Feng (University of Paderborn); Sarah Forstinger (University of Paderborn); Christian Peitz (University of Paderborn)
    Abstract: This paper discusses the detailed performance of an iterative plug-in (IPI) bandwidth selector for estimating the diurnal duration pattern in a recently proposed semiparametric autoregressive conditional duration (SemiACD) model. For this purpose an alternative formula of the asymptotically optimal bandwidth is proposed. A large simulation study was carried out based on this new formula. The effect of different factors, which affect the selected bandwidth is discussed in detail. It is shown that the proposed IPI algorithm works very well in practice and that the SemiACD model in general, is clearly superior to the parametric ACD model, if there is a deterministic trend in the duration data. It is also shown that the quality of the bandwidth selection, the diurnal pattern estimate and the parametric estimation will all be clearly improved, if the sample size is enlarged. Furthermore, according to the goodness-of-fit of the estimated diurnal pattern, a best combination of the above mentioned factors is found.
    Keywords: Autoregressive conditional duration, diurnal duration patterns, local linear estimator, iterative plug-in, simulation
    JEL: C14 C41
    Date: 2013–08
  3. By: Arief Anshory Yusuf (Department of Economics, Padjadjaran University)
    Abstract: There has been an increasing attention to the recent increase in Indonesian inequality. From 2009 to 2011, Gini coefficient increased from 0.37 to 0.41, the highest ever recorded in Indonesian history. During the same period, the world prices of many Indonesian export commodities doubled. As those sectors, particularly mining, is highly capital intensive and skilled-labor intensive, this may increase the returns to factors more intensively used in those sectors, and thus has a tendency to increase inequality. Using the INDONESIA-E3 model, a Computable General Equilibrium model of an Indonesian economy, this paper investigates to what extent the increase in the world prices of Indonesian main commodity export (estate crops and mining) contributes to the increase in inequality in Indonesia. The impact of increases in the prices of 8 main Indonesian export commodities was simulated during the period of 2009-2011. The result suggests that they indeed increase inequality, yet with a magnitude of only a quarter of the increase in Gini coefficient observed during the period of 2009 to 2011. The dominant factors behind the increase in Gini coefficient can be traced to the increase in the world price of mining commodities rather than estate crops. The effect of increases in the world prices of rubber, palm oil, coffee, and tea is negligible and poverty-reducing in rural areas. On the other hand, the effect of the increase in the world price of coal, oil, gas, and metals generates a significant increase in inequality. These findings suggest that, from the perspective of equality, restricting export of estate crops commodities in the midst of the commodity booms will not be favorable to the poverty reduction agenda, particularly in rural areas.
    Keywords: Commodity prices, inequality, Indonesia, General Equilibrium, CGE
    JEL: I32 D58
    Date: 2014–06
  4. By: Daniel Arribas-Bel (University of Birmingham); Peter Nijkamp (, VU University Amsterdam); Jacques Poot (University of Waikato)
    Abstract: Cultural diversity is a complex and multi-faceted concept. Commonly used quantitative measures of the spatial distribution of culturally-defined groups – such as segregation, isolation or concentration indexes – are often only capable of identifying just one aspect of this distribution. The strengths or weaknesses of any measure can only be comprehensively assessed empirically. This paper provides evidence on the empirical properties of various spatial measures of cultural diversity by using Monte Carlo replications of agent-based modeling (MC-ABM) simulations with synthetic data assigned to a realistic and detailed geographical context of the city of Amsterdam. Schelling’s classical segregation model is used as the theoretical engine to generate patterns of spatial clustering. The data inputs include the initial population, the number and shares of various cultural groups, and their preferences with respect to co-location. Our MC-ABM data generating process produces output maps that enable us to assess the performance of various spatial measures of cultural diversity under a range of demographic compositions and preferences. We find that, as our simulated city becomes more diverse, stable residential location equilibria are only possible when people, particularly minorities, become more tolerant. We test whether observed measures can be interpreted as revealing unobserved preferences for co-location of individuals with their own group and find that the segregation and isolation measures of spatial diversity are shown to be non-decreasing in increasing preference for within-group co-location, but the Gini coefficient and concentration measures are not.
    Keywords: cultural diversity, spatial segregation, agent-based model, Monte Carlo simulation
    JEL: C63 J15 R23 Z13
    Date: 2014–06
  5. By: Vivien Lespagnol (Aix-Marseille University (Aix-Marseille School of Economics), CNRS & EHESS); Juliette Rouchier (Aix-Marseille University (Aix-Marseille School of Economics), CNRS & EHESS)
    Abstract: This paper studies the effect of investor’s bounded rationality on market dynamics. In an order driven market, we consider a few-types model where two risky assets are exchanged. Agents differ by their behavior, knowledge, risk aversion and investment horizon. The investor’s demand is defined by a utility maximization under constant absolute risk aversion. Relaxing the assumption of perfect knowledge of the fundamentals enables to identify two components in a bubble. The first one comes from the unperceived fundamental changes due to trader’s belief perseverance. The second one is generated by chartist behavior. In all simulations, speculators make the market less efficient and more volatile. They also increase the maximum amount of assets exchanged in the most liquid time step. However, our model is not showing raising average volatility on long term. Concerning the fundamentalists, the unknown fundamental has a stabilization impact on the trading price. The closer the anchor is to the true fundamental value, the more efficient the market is, because the prices change smoothly.
    Keywords: Agent-based modeling, market microstructure, fundamental value, trading volume, _efficient market
    JEL: C63 D44 G12 G14
    Date: 2014–05
  6. By: Gräbner, Claudius
    Abstract: Institutionalist economists have always been criticizing the neoclassical way of studying the economy, especially because of its obsession to a very strict and flawed formalism. This formalism receives critique also from advocates of agent-based computational economic (ACE) models. The criticism seems to be similar to that of institutional economists. Although some authors consider ACE models to belong to a completely new way of thinking about economics, many concepts of ACE have been anticipated by institutionalists: Although using a different vocabulary, ACE proponents speak about cumulative causation, realistic agents, explanatory models, dynamic relations among individuals and the necessity to see the economy as an systemic whole rather than from an atomistic perspective. Consequently, the emergence of the ACE framework may not be left unconsidered by institutionalist economists. This paper investigates the consistency of ACE models with the institutionalist research program as defined by Myrdal, Wilber and Harrison and other original institutionalists and discusses whether ACE models can be a useful heuristic for institutionalist "pattern modelling". I study the ability of ACE models to provide a holistic, systemic and evolutionary picture of the economy, the conception of agents in ACE models, and ask whether they can help to understand the social stratification of a society with its power relations. I also compare ACE models with earlier attempts to formalize institutionalist analysis, e.g. by Bush and Elsner (Theory of Institutional Change), Hayden (Social-­Fabric-Matrix) or Radzicki (System Dynamics).
    Keywords: Original Institutional Economics, Methodology, Epistemology, Ontology, Agent-Based Computational Economics, Critical Realism
    JEL: B41 B52 C63
    Date: 2014–06–02
  7. By: Denis Belomestny; Tigran Nagapetyan; Vladimir Shiryaev
    Abstract: In this paper we discuss the possibility of using multilevel Monte Carlo (MLMC) methods for weak approximation schemes. It turns out that by means of a simple coupling between consecutive time discretisation levels, one can achieve the same complexity gain as under the presence of a strong convergence. We exemplify this general idea in the case of weak Euler and Milstein schemes, and prove that the complexity of the corresponding "weak" MLMC estimates are of order $\varepsilon^{-2}\log ^{2}(\varepsilon)$ and $\varepsilon^{-2},$ respectively. Thus, we propose a new simple approach how to achieve the complexity $\varepsilon^{-2}$ without time-consuming L\'evy area simulation. The numerical performance of the new "weak" MLMC methods is illustrated by several numerical examples.
    Date: 2014–06
  8. By: Alfandari, Laurent (ESSEC Business School); Plateau, Agnès (Conservatoire National des Arts et Métiers (CNAM)); Scheplerc, Xavier (Université du Havre, LITIS et LMAH)
    Abstract: In this paper, we study a multi-periodic production planning problem in agriculture. This problem belongs to the class of crop rotation planning problems, which have received increased attention in the literature in recent years. Crop cultivation and fallow periods must be scheduled on land plots over a given time horizon so as to minimize the total surface area of land used, while satisfying crop demands every period. This problem is proven strongly NP-hard. We propose a 0-1 linear programming compact formulation based on crop-sequence graphs. An extended formulation is then provided with a polynomial-time pricing problem, and a Branch-and-Priceand- Cut (BPC) algorithm is presented with adapted branching rules and cutting planes. The numerical experiments on instances varying the number of crops, periods and plots show the effectiveness of the BPC for the extended formulation compared to solving the compact formulation, even though these two formulations have the same linear relaxation bound.
    Keywords: OR in agriculture; crop rotations; production planning; column generation; branch-and-price-and-cut
    JEL: Q10
    Date: 2014–04
  9. By: Diallo, Ibrahima Amadou
    Abstract: This paper theoretically analyzes the dynamics of economic growth and the environmental Kuznets curve. This curve states an inverse U-relationship between pollution and income. The presented model specifically shows how a dynamic environmental Kuznets curve can emerge by introducing pollution and abatement technology in a public spending model of endogenous economic growth. We also derive the turning point in function of the parameters of the model. The numerical section demonstrates that when taxes are below some threshold, the turning point decreases with taxes but it increases when taxes are above the threshold point given some explanations about an N-shaped Kuznets curve. Additionally, the simulations demonstrate that taxes reduce the level of pollution by pulling down the environmental Kuznets curve. Lastly the numerical exercises highlight that the pollution level of the social planner problem is less than that of the representative agent.
    Keywords: Abatement; Dynamic Optimization; Endogenous Growth Theory; Environmental Kuznets Curve; Numerical Simulations; Pollution; Public Spending; Taxes; Turning Point
    JEL: C61 C63 H23 H41 H54 H61 O41 O44
    Date: 2014–06–09
  10. By: Grégoire De Lagasnerie (Sciences Po LIEPP); Charlotte Geay (INSEE); Makram Larguem (Université Panthéon-Assas - Paris II)
    Abstract: Population ageing will be a major challenge in Europe in the coming decades. This phenomenon will raise the question of the sustainability of public spending with increasing healthcare provision costs. This paper presents a dynamic micro-­‐simulation model for outpatient healthcare expenditure in France, which projects healthcare costs in the long run. Like all the dynamic micro-­‐simulation models, the model projects the population structure over time. The projections are run using a transition process between three states: two non-­‐absorbing (good-­‐health or ill-­‐health) and one absorbing state (death). The outpatient healthcare expenditure is estimated on data between 2002 and 2008 through a two-­‐part model. While healthcare spending of 25 years old and more represent 3.9% of GDP in 2008, they would reach 4.6% in the baseline scenario in 2032 (+0.7 percentage point of GDP or +17.5%). A difference in the share of expenditure in GDP appears between scenarios with different evolutions of health status during the projection period. Outpatient healthcare spending represents 4.6% of GDP in the central scenario in 2032, against 4.4 % in the most optimistic scenario and 4.7% in a pessimistic scenario.
    Date: 2014–05
  11. By: Christophe Gouel (Economie Publique, INRA; Centre d'Etudes Prospectives et d'Informations Internationales)
    Abstract: This paper compares numerical methods for solving the competitive storage model. Because storage implies a nonnegativity constraint on stocks, the solution methods must be considered carefully. The model is solved using value function iteration and several projection approaches, including parameterised expectations and decision rules approximation. In considering a storage model with convenience yield, in which the inequality constraint is smoothed, perturbation methods are also applied. Parameterised expectations approximation proves to be the most accurate method, whereas perturbation techniques are shown inadequate for solving this highly nonlinear model. The endogenous grid method allows rapid solution if supply is assumed to be inelastic.
    Abstract: Cet article compare les méthodes numériques permettant de résoudre le modèle de stockage compétitif. Puisque le stockage implique une contrainte de non-négativité des stocks, les méthodes de résolution doivent être choisies avec soin. Le modèle est résolu par itération sur la fonction valeur et à l'aide de plusieurs méthodes de projection, incluant la paramétrisation des anticipations et l'approximation des règles de décisions. En considérant aussi un modèle de stockage avec rendement d'opportunité, dans lequel la contrainte d'inégalité est lissée, des méthodes de perturbation sont aussi appliquées. La paramétrisation des anticipations est la méthode la plus précise, alors que les méthodes de perturbation se montrent inadaptées pour résoudre ce modèle très non-linéaire. La méthode de grille endogène permet une résolution très rapide si l'offre est supposée inélastique.
    Keywords: Binding constraint, Nonlinear rational expectations models, Numerical methods, paramètre du modèle, paramétrisation, stockagecontrainte paramétriquecoût de stockage
    Date: 2013
  12. By: Finke, Katharina; Heckemeyer, Jost H.; Spengel, Christoph
    Abstract: In their famous Mirrlees review (2011) on reforming the tax system for the 21st century, the authors put forward the introduction of an allowance for corporate equity regime. In recent years, several countries introduced an ACE regime. The main feature of an ACE regime is that it removes tax distortions on marginal investment and finance distortions. Yet, by narrowing the tax base an ACE regime potentially requires an increase in tax rates which might affect location choices and profit shifting activity negatively. In this paper, we employ a microsimulation model to determine the consequences of introducing an ACE regime in Germany. The simulation results show that granting an ACE for corporate income tax purposes results in a revenue loss of about 18%. This could be financed by an increase of the combined profit tax rate by 6 percentage points. At firm level, our analysis illustrates the heterogeneous distribution of the reform effect accross the sample. For 50% of firms between the 25th and 75th percentile, introducing an ACE regime reduces tax payments between 35% and 2%. If the ACE is combined with a tax rate adjustment, the tax effect ranges between -32% and +7.1% for firms between the 25th and 75th percentile. With respect to behavioural responses on decision margins, we find that introducing the ACE reduces the mean debt-ratio by about 1.5 percentage points in the short run. For the capital-stock we arrive at a mean short-term increase of 2.4%. Finally, our computations show that the ACE regime with adjusted profit tax rate cannot be overall tax neutral. In particular, the increase in the profit tax rate required to finance the equity allowance induces intensified outward profit-shifting activities and affects location choices negatively. In the short-run the tax revenue is therefore shown to decline to about 95% of its original level. --
    Keywords: Tax Reform,Allowance for Corporate Equity,Microsimulation,Tax Policy Evaluation
    JEL: H25 H32 K34
    Date: 2014

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