nep-cmp New Economics Papers
on Computational Economics
Issue of 2014‒07‒21
six papers chosen by
Stan Miles
Thompson Rivers University

  1. Theoretical Simulation in Health Economics: An application to Grossman's Model of Investment in Health Capital By Katerina Koka; Audrey Laporte; Brian Ferguson
  2. Price and Income Elasticities in LAC Countries: The Importance of Domestic Production By Carla Canelas; François Gardes; Silvia Salazar
  3. Microscopic Models for Welfare Measures Addressing a Reduction of Economic Inequality By Maria Letizia Bertotti; Giovanni Modanese
  4. Extending the GTAP Data Base and Model to Cover Domestic Support Issues using the EU as Example By Urban, Kirsten; Hans Grinsted Jensen; Martina Brockmeier
  5. Envisioning and Enabling Sustainable Smart Markets By Ketter, W.
  6. Transparency and Deliberation within the FOMC: a Computational Linguistics Approach By Stephen Hansen; Michael McMahon; Andrea Prat

  1. By: Katerina Koka; Audrey Laporte; Brian Ferguson
    Abstract: In this paper we argue on the merits of theoretical simulation, a widely used technique in other areas of theoretical economics, to extending the phase diagram analysis of the Grossman's 1972 model of investment in health capital. We argue that theoretical simulations are particularly useful when considering problems with multiple state variables. To illustrate, we perform simulations with varying assumptions of health depreciation rates and conditional survival probabilities and generate time-plots for the evolution of health capital and health investments over individual finite lifetimes.
    Keywords: Theoretical simulation, grossman model, health capital
    JEL: I12 C61 C63
    Date: 2014–06
  2. By: Carla Canelas (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon-Sorbonne); François Gardes (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon-Sorbonne, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris); Silvia Salazar (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon-Sorbonne)
    Abstract: The inclusion of time in the household domestic production function allows to calculate full prices that are in turn used to estimate consistent monetary and time elasticities on micro cross-sectional data. This article provides elasticity estimates for different commodity groups in absence of observable price data, solving the persistent problem of price data availability in most developing countries. The estimated price elasticities perform well compared to other methods and can be computed for different sub-populations, which is important for policy design and the calibration of simulation models.
    Keywords: Demand elasticities; domestic production; time-use
    Date: 2014–05
  3. By: Maria Letizia Bertotti; Giovanni Modanese
    Abstract: We formulate a flexible micro-to-macro kinetic model which is able to explain the emergence of income profiles out of a whole of individual economic interactions. The model is expressed by a system of several nonlinear differential equations which involve parameters defined by probabilities. Society is described as an ensemble of individuals divided into income classes; the individuals exchange money through binary and ternary interactions, leaving the total wealth unchanged. The ternary interactions represent taxation and redistribution effects. Dynamics is investigated through computational simulations, the focus being on the effects that different fiscal policies and differently weighted welfare policies have on the long-run income distributions. The model provides a tool which may contribute to the identification of the most effective actions towards a reduction of economic inequality. We find for instance that, under certain hypotheses, the Gini index is more affected by a policy of reduction of the welfare and subsidies for the rich classes than by an increase of the upper tax rate. Such a policy also has the effect of slightly increasing the total tax revenue.
    Date: 2014–05
  4. By: Urban, Kirsten; Hans Grinsted Jensen; Martina Brockmeier
    Abstract: The EU Single Farm Payment (SFP) is currently distributed in proportion to primary factor shares in version 8 of the GTAP database. In this paper, we investigate whether this way of modeling the EU SFP makes a difference in analyzing agricultural policy reforms. To do so, we create alternative versions of the GTAP database to compare the effects with the default setting in GTAP. Employing OECD data, along with the GTAP framework, we vary the assumptions about the allocation of the SFP. In the process, we demonstrate how to alter and update the GTAP database to implement domestic support of OECD PSE tables. We provide a detailed overview supplemented with assumptions of payment allocation, shock calculations and in particular, the Altertax procedure to update value flows and price equations extended in the GTAP model. Subsequently, we illustrate the impact of those assumptions by simulating a 100% removal of the SFP using the deviating versions of GTAP database. This sensitivity analysis reveals strong differences in results, but particularly in production responses of food and agricultural sectors that decrease with an increasing degree of decoupling. Furthermore, our analysis shows that the effect on welfare and the trade balance decreases with an increasing degree of decoupling. This experiment shows that the allocation of the SFP can have strong impacts on simulation results.
    Date: 2014
  5. By: Ketter, W.
    Abstract: __Abstract__ Many of the world’s most urgent problems such as climate change, population growth, poverty, malnutrition and environmental degradation not only demand solutions but also require us to find more sustainable ways of living. Market mechanisms can be effective in solving large-scale resource allocation problems of this kind, but only if the market design reflects the social costs. The growth and spread of advanced information and communication technologies mean that new smart markets offer a way to achieve this and will become central to many areas of economic activity. However, the volumes of data and speed of transactions involved place a burden on human decisionmaking capabilities, and information systems can have a central role to play in helping to devise solutions – in particular, in developing intelligent software agents to provide decision support. This address looks at the challenges and opportunities involved for information systems researchers, and sets out an agenda for sustainable smart markets research, centered on collaborative approaches. It focuses on three overlapping areas: market and learning agent design; market evaluation using autonomous learning agents; and real-time decision support. Examples are included of current work on sustainable smart markets for electricity (smart grid) and for flowers (Dutch Flower Auctions).
    Keywords: Agent-based Decision Support, Competitive Benchmarking, Energy Information Systems, Sustainable Energy, Machine Learning, Mechanism Design, Preference Modeling, Smart Grid, Supply Chain Management
    JEL: C61 D4 D61 D81 O13
    Date: 2014–06–20
  6. By: Stephen Hansen; Michael McMahon; Andrea Prat
    Abstract: How does transparency, a key feature of central bank design, affect the deliberation of monetary policymakers? We exploit a natural experiment in the Federal Open Market Committee in 1993 together with computational linguistic models (particularly Latent Dirichlet Allocation) to measure the effect of increased transparency on debate. Commentators have hypothesized both a beneficial discipline effect and a detrimental conformity effect. A difference-in-differences approach inspired by the career concerns literature uncovers evidence for both effects. However, the net effect of increased transparency appears to be a more informative deliberation process.
    Keywords: monetary policy, deliberation, FOMC, transparency, career concerns
    JEL: E52 E58 D78
    Date: 2014–05

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