nep-cmp New Economics Papers
on Computational Economics
Issue of 2015‒05‒22
eight papers chosen by

  1. Emerging Policy Issues: Localisation Barriers to Trade By Susan Stone; James Messent; Dorothee Flaig
  2. Baserunning - analyzing the sensitivity and economies of scale of the Swedish national freight model system using stochastic production-consumption-matrices By Westin , Jonas; de Jong , Gerard; Vierth , Inge; Krüger , Niclas; Karlsson, Rune; Johansson, Magnus
  3. Oil and Unemployment in a New-Keynesian Model By Verónica Acurio Vásconez
  4. Optimal Foreign Borrowing in a Multisector Dynamic Equilibrium Model: a Case Study for Brazil By Octavio A. F. Tourinho
  5. Maximum Weight Relaxed Cliques and Russian Doll Search Revisited By Timo Gschwind; Stefan Irnich; Isabel Podlinski
  6. The fiscal effects of work-related tax expenditures in Europe. By Salvador Barrios; Serena Fatica; Diego Martínez-López; Gilles Mourre
  7. On quantifying the climate of the nonautonomous lorenz-63 model By J.D. Daron; David A. Stainforth
  8. Route Feasibility Testing and Forward Time Slack for the Synchronized Pickup and Delivery Problem By Timo Gschwind

  1. By: Susan Stone; James Messent; Dorothee Flaig
    Abstract: Despite the predominately negative evidence of the impact of local content requirements on trade, they continue to play a significant role in trade policy. This has been particularly true since the financial crisis of 2008. The work presented here provides new evidence of the detrimental effects these policies have on the imposing country’s own economy. Most empirical studies have focused on the long run inefficiencies associated with LCRs, notably in the effected sector. This paper highlights the costs to other sectors in the economy, the different impacts on intermediate versus final demand, and the declines in trade in third-party economies, despite not engaging in direct trade with the imposing country. Economies imposing LCRs experience a decrease in exports in non-LCR effected sectors and a growing concentration of domestic activity in a few targeted sectors, undermining potential growth and innovation on a broader scale. The paper concludes by offering policy alternatives.
    Keywords: impact, CGE, trade policy, Local Content Requirements
    JEL: F14 F47
    Date: 2015–05
  2. By: Westin , Jonas (CERUM); de Jong , Gerard (ITS Leeds); Vierth , Inge (VTI); Krüger , Niclas (VTI); Karlsson, Rune (VTI); Johansson, Magnus (Trafikanalys)
    Abstract: The purpose of the paper is to analyze how sensitive the Swedish national freight model system Samgods is to uncertainties in its production-consumption matrices (PC-matrices). This is done by studying how sensitive outputs from one of its key component, the logistics model, are to changes in the PC-matrices. This paper is, to our knowledge, the first attempt to analyze the sensitivity and economies of scale of a national freight transport model using Monte Carlo simulation. The results indicate that the logistics model is able to find new logistics solutions when larger demand volumes are assumed. Freight volumes are calculated to shift to sea transport. If the transport volume increases with one percent, the logistics cost per tonne is on average reduced by about 0.5 percent. Part of the cost reduction comes from increased consolidation of shipments due to larger transport volumes. There is also a positive correlation between total transport demand and the load factor for heavier lorries, trains and larger ships. Without empirical data and further analysis it is difficult to assess the estimated strength of the effect. Furthermore, the analysis indicates that it might be possible to reduce runtimes by removing small transport flows from the PC-matrices without affecting aggregate results too much.
    Keywords: Sensitivity analysis; Large scale freight model; Monte Carlo simulation
    JEL: C52 C63 R41 R42
    Date: 2015–05–13
  3. By: Verónica Acurio Vásconez (Centre d'Economie de la Sorbonne - Paris School of Economics)
    Abstract: The effects of oil shocks in inflation and growth have been widely discussed in the literature, however few have focused on the impact of oil price increases on unemployment. In order to shed some light on this problem, this paper develops a medium scale Dynamic Stochastic General Equilibrium model (DSGE) that allows for oil utilization in production and consumption as in Acurio-Vásconez (2015); unemployment as in Mortensen & Pissarides (1994); and staggered nominal wage contracting as in Gertler & Trigari (2009). It then analyzes the effects of oil price increases on the economy. The model recovers most of the well-known stylized facts observed after the oil shock in the 2000s'. A sensitivity analysis shows that the reduction of the bargaining power of households to negotiate wage contracts reduces the impact of an oil shock in unemployment, without affecting negatively GDP. However, it also shows that the reduction of bargaining power, together with wage flexibility strongly reduces the increase in unemployment after an oil shock, but causes a decrease in real wages, which reduces household income and affects GDP
    Keywords: New-Keynesian model; DSGE; oil; CES; Match & Search Models; Unemployment
    JEL: D58 E24 E32 Q43
    Date: 2015–05
  4. By: Octavio A. F. Tourinho
    Abstract: This paper shows how a dynamic multisector equilibrium model can be foraulated to be able to analyze the optimal borrowinG policy of a developing country. It also describes how a non-linear programming model with the proposed features was constructed for Brazil. And discusses the optinal solution of a base case scenario for the economy in the next 20 years. The sensitivity analysis emphasizes the response of the model to different interest rates on foreign borrowing, alternative export expansion and imports requirements scenarios, and different hypothesis with respect to future petroleum prices and doll\estic petroleum production. The main conclusion is that the optimal long run borrowing policy for Brazil is quite sensitive to the expected future interest rates, and may be different from some myopic strategies which are currently being suggested to handle the developing countries foreign debt problems. The other important conclusion ia that in the less favorable scenarios - protectionist foreign environment or higher petroleum prices - it is not optimal to postpone the required domestic adjustments by increased foreign borrowing. The usefulness of the model is not restricted to this set of simulations, since it can be readily adapted to address related issues such as foreign trade, investment and indirect taxation policies.
    Date: 2015–01
  5. By: Timo Gschwind (Johannes Gutenberg-Universität Mainz, Germany); Stefan Irnich (Johannes Gutenberg-Universität Mainz, Germany); Isabel Podlinski (Zalando SE, Germany)
    Abstract: Trukhanov et al. [Trukhanov S, Balasubramaniam C, Balasundaram B, Butenko S (2013) Algorithms for detecting optimal hereditary structures in graphs, with application to clique relaxations. Comp. Opt. and Appl., 56(1), 113–130] used the Russian Doll Search (RDS) principle to effectively find maximum hereditary structures in graphs. Prominent examples of such hereditary structures are cliques and some clique relaxations intensely discussed and studied in network analysis. The effectiveness of the tailored RDS by Trukhanov et al. for s-plex and s-defective clique can be attributed to their cleverly designed incremental verification procedures used to distinguish feasible from infeasible structures. In this short note, we clarify the incompletely presented verification procedure for s-plex and present a new and simpler incremental verification procedure for s-defective cliques with a better worst-case runtime. Furthermore, we develop an incremental verification for s-bundle, giving rise to the first exact algorithm for solving the maximum cardinality and maximum weight s-bundle problems.
    Keywords: Relaxed clique, Russian Doll Search, Optimal hereditary structures, Maximum weight problem
    Date: 2015–05–19
  6. By: Salvador Barrios; Serena Fatica; Diego Martínez-López; Gilles Mourre
    Abstract: The paper examines the fiscal impacts, and the associated welfare cost, of marginal reforms to work-related tax relief in five European countries. We combine a theoretical model of labour supply with micro-simulation results from an EU-wide model, which allows us to capture the interaction between the specific tax incentive and other relevant provisions of the tax-benefit system along the entire earnings distribution. We find that changes in labour supply decisions – both at the extensive (participation) and at the intensive margin (hours worked) – have significant impacts on the revenue gain from the simulated reforms. Our results suggest that at least one-fourth of the extra tax revenues collected through a reduction in work-related tax incentives is washed away following labour supply adjustment, notably due to lower participation by individuals most at risk of exclusion. In some instances, the erosion of the initial revenue gain becomes substantial. For policies strongly targeted at the bottom of the earnings distribution, the reform might even bring about a net revenue loss, depending on the calibration of the labour supply elasticities to reflect heterogeneity across types of workers. The welfare effect of contractions to these tax schemes could be far from negligible.
    Keywords: tax expenditures, labour supply, marginal welfare costs.
    JEL: H24 H31 J20
    Date: 2015–05
  7. By: J.D. Daron; David A. Stainforth
    Abstract: The Lorenz-63 model has been frequently used to inform our understanding of the Earth's climate and provide insight for numerical weather and climate prediction. Most studies have focused on the autonomous (time invariant) model behaviour in which the model's parameters are constants. Here we investigate the properties of the model under time-varying parameters, providing a closer parallel to the challenges of climate prediction, in which climate forcing varies with time. Initial condition (IC) ensembles are used to construct frequency distributions of model variables and we interpret these distributions as the time-dependent climate of the model. Results are presented that demonstrate the impact of ICs on the transient behaviour of the model climate. The location in state space from which an IC ensemble is initiated is shown to significantly impact the time it takes for ensembles to converge. The implication for climate prediction is that the climate may, in parallel with weather forecasting, have states from which its future behaviour is more, or less, predictable in distribution. Evidence of resonant behaviour and path dependence is found in model distributions under time varying parameters, demonstrating that prediction in nonautonomous nonlinear systems can be sensitive to the details of time-dependent forcing/parameter variations. Single model realisations are shown to be unable to reliably represent the model's climate; a result which has implications for how real-world climatic timeseries from observation are interpreted. The results have significant implications for the design and interpretation of Global Climate Model experiments. Over the past 50 years, insight from research exploring the behaviour of simple nonlinear systems has been fundamental in developing approaches to weather and climate prediction. The analysis herein utilises the much studied Lorenz-63 model to understand the potential behaviour of nonlinear systems, such as the 5 climate, when subject to time-varying external forcing, such as variations in atmospheric greenhouse gases or solar output. Our primary aim is to provide insight which can guide new approaches to climate model experimental design and thereby better address the uncertainties associated with climate change prediction. We use ensembles of simulations to generate distributions which 10 we refer to as the \climate" of the time-variant Lorenz-63 model. In these ensemble experiments a model parameter is varied in a number of ways which can be seen as paralleling both idealised and realistic variations in external forcing of the real climate system. Our results demonstrate that predictability of climate distributions under time varying forcing can be highly sensitive to 15 the specification of initial states in ensemble simulations. This is a result which at a superficial level is similar to the well-known initial condition sensitivity in weather forecasting, but with different origins and different implications for ensemble design. We also demonstrate the existence of resonant behaviour and a dependence on the details of the \forcing" trajectory, thereby highlighting 20 further aspects of nonlinear system behaviour with important implications for climate prediction. Taken together, our results imply that current approaches to climate modeling may be at risk of under-sampling key uncertainties likely to be significant in predicting future climate.
    JEL: J1
  8. By: Timo Gschwind (Johannes Gutenberg-Universität Mainz, Germany)
    Abstract: The temporal constraints of the Synchronized Pickup and Delivery Problem (SPDP) impose a complex scheduling problem for the service times at the customer locations. This makes the efficient feasibility checking of routes intricate. We present two different route feasibility checks for the SPDP and compare their practical runtime on a huge number of randomly generated routes. Furthermore, we generalize the concept of forward time slack, which has proven a versatile tool for feasibility testing of VRP variants, to the SPDP.
    Keywords: Vehicle routing, Temporal synchronization, Feasibility testing, Forward time slack
    Date: 2015–05–18

General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.