nep-cmp New Economics Papers
on Computational Economics
Issue of 2015‒10‒25
six papers chosen by
Stan Miles
Thompson Rivers University

  1. A simple agent-based spatial model of the economy: tools for policy By Bernardo Alves Furtado; Isaque Daniel Rocha Eberhardt
  2. Remittances and the Redistributive Tax Policy in Ghana: A Computable General Equilibrium Approach By Isaac Dadson; Ryuta Ray Kato
  3. The Macroeconomic and Sectoral Effects of Terrorism in the U.S.: A Reconciliation of CGE and Econometric Approaches By J. Nassios; J.A. Giesecke
  4. European carbon market : lessons on the impact of a market stability reserve using the Zephyr model By Raphaël Trotignon; Pierre-André Jouvet; Boris Solier; Simon Quemin; Jérémy Elbeze
  5. The Energy Implications of City Size and Density By William Larson; Anthony M. Yezer
  6. Economic Implications of Enhanced Forecast Accuracy: The Case of Photovoltaic Feed-In Forecasts By Ruhnau, Oliver; Hennig, Patrick; Madlener, Reinhard

  1. By: Bernardo Alves Furtado; Isaque Daniel Rocha Eberhardt
    Abstract: This study simulates the evolution of artificial economies in order to understand the tax relevance of administrative boundaries in the quality of life of its citizens. The modeling involves the construction of a computational algorithm, which includes citizens, bounded into families; firms and governments; all of them interacting in markets for goods, labor and real estate. The real estate market allows families to move to dwellings with higher quality or lower price when the families capitalize property values. The goods market allows consumers to search on a flexible number of firms choosing by price and proximity. The labor market entails a matching process between firms (location and offered wage) and candidates (qualification). The government may be configured into one, four or seven distinct sub-national governments. The role of government is to collect taxes on the value added of firms in its territory and invest the taxes into higher levels of quality of life for residents. The model does not have a credit market. The results suggest that the configuration of administrative boundaries is relevant to the levels of quality of life arising from the reversal of taxes. The model with seven regions is more dynamic, with higher GDP values, but more unequal and heterogeneous across regions. The simulation with only one region is more homogeneously poor. The study seeks to contribute to a theoretical and methodological framework as well as to describe, operationalize and test computer models of public finance analysis, with explicitly spatial and dynamic emphasis. Several alternatives of expansion of the model for future research are described. Moreover, this study adds to the existing literature in the realm of simple microeconomic computational models, specifying structural relationships between local governments and firms, consumers and dwellings mediated by distance.
    Date: 2015–10
  2. By: Isaac Dadson (Ghana Statistical Service, Economic Statistics Division, Ghana); Ryuta Ray Kato (International University of Japan)
    Abstract: This paper numerically explores the distributive tax policy for improving both efficiency and equity with increased remittances in Ghana within a computable general equilibrium (CGE) framework. The generalized framework with the latest Ghanaian input-output table of year 2005 with 59 different production sectors provides the following results: First, the government can improve both efficiency and equity by using a government surplus generated by increased remittances without additional tax revenue. Second, if the government is concerned about equity, then a surplus used for more direct transfers to the rural households results in the best outcome in terms of equity. Third, such a policy also results in the improvement in efficiency. Welfare of not only rural but also urban households improves by such a policy through its strong stimulation effect on the demand side. Fourth, while the impact through the supply side is relatively smaller, an introduction of subsidies to production of the 'Cocoa Beans' sector results in the best outcome for the improvement in efficiency and equity among all supply side tax policies. Fifth, if the government is concerned only about efficiency, then a policy to use a surplus for more government spending on education or health achieves the highest efficiency through its direct demand effect. Under such a policy, the positive impact on equity is limited. Finally, while the Ghanaian economy can enjoy the largest benefits in improved efficiency as a whole when a surplus is used for more government spending on education or health, increased efficiency gain will be more distributed to the government sector in comparison with the case when a surplus is used for more direct transfers to the rural households.
    Keywords: Ghana, Remittance, Efficiency, Equity, Taxation, Computable General Equilibrium(CGE) Model, Simulation
    JEL: C68 D58 H20 O15
    Date: 2015–10
  3. By: J. Nassios; J.A. Giesecke
    Abstract: Government decision makers must make plans for a wide range of terrorism threat scenarios. In the formulation and evaluation of these plans, economic consequence analysis plays an important role in elucidating the benefits of successful deterrence, mitigation, and post-event management. However, planning in this regard is not easy, particularly when terrorism events have diverse characteristics defined along many dimensions, including the method, location, scale and frequency of attack(s). As discussed in previous work by [Giesecke et al. (2015)], CGE models are well-suited to the analysis of the economic consequences of a diverse range of threat scenarios; with a large number of exogenous variables, CGE models can be used to model shocks related to the many particular characteristics that can define a given individual terrorism event. This also makes them well suited to the analysis of the many hypothetical scenarios that must be investigated in contingency planning by defence and emergency management decision makers. In defining a terrorism event for input to a CGE model, two broad sets of shocks are typically recognised: (1) Physical impacts on observable economic variables, e.g., fatalities, asset damage, business interruption; and (2) Behavioural impacts on unobservable structural variables, e.g., the effects of fear and uncertainty on workers, investors, and consumers. Assembling shocks related to the physical characteristics of a terrorism event is relatively straightforward, since estimates are either readily available or plausibly inferred. However, assembling shocks describing the behavioural characteristics of terrorism events is difficult; with values for unobservable variables such as impacts on required rates of return, worker compensating wage requirements, and consumer willingness to pay having to either be inferred or estimated by indirect means. Typically, this has been achieved via reference to extraneous literature. But how confidant can planners be that the impact magnitudes reported in such ex-ante analyses are plausible? Ex-post econometric studies of terrorism, such as those by [Blomberg et al. (2004)] and [Blomberg and Hess (2006)], present models for the response of observable economic variables, e.g., real GDP, investment, government expenditure and trade, to terrorism and other forms of conflict. [Dixon and Rimmer (2002)] demonstrate that a CGE model can be used to infer outcomes for unobservable structural variables using observable economic variables. In a similar way, in this paper we use the findings by [Blomberg et al. (2004)] to determine point estimates for the relevant (unobservable) structural variables impacted by terrorism events using the USAGE 2.0 dynamic CGE model of the US economy ([Dixon and Rimmer (2002)]; [Dixon and Rimmer (2004)]). This allows us to: (i) Explore the relative contributions of implicit structural and policy shifts in the results for observable variables reported in [Blomberg et al. (2004)]; (ii) Extend Blomberg's analysis of results for macro variables into the sectoral dimension, thereby elucidating the consequences of terrorism on prospects for individual industries; and (iii) Compare implicit structural shocks in Blomberg with the assumed structural shocks in earlier CGE papers.
    Keywords: Terrorism, Economic impact, Dynamic CGE modelling
    JEL: C68 F52
    Date: 2015–10
  4. By: Raphaël Trotignon; Pierre-André Jouvet; Boris Solier; Simon Quemin; Jérémy Elbeze
    Abstract: In January 2014, the European Commission proposed the introduction of a Market Stability Reserve (MSR) to improve the functioning of the European carbon emission trading scheme. This article is an attempt to enlighten the possible effects of such a reserve on the functioning of the EU ETS using the behavior-based simulation model Zephyr, specifically designed for representing imperfect inter-temporal compliance behavior in a simple framework. Our results suggest that the MSR can indeed raise the price in the short-medium term, reduce the number of allowances in circulation and foster earlier emission reductions. Nevertheless, it would do so at the expense of higher overall costs, because allowances are unlikely to be returned entirely to the market when needed, thus reinforcing the cap. The MSR also does not seem to have the desired dampening effect in case of external shocks. We conclude that although the MSR can help trigger early abatement and put Europe on a more ambitious abatement pathway over the long term, in the frame of our methodology, it seems unlikely that such a reserve make market participants and the public authority more able to deal with uncertainties in the future.
    Keywords: EU ETS, Market Stability Reserve (MSR), Simulation model, Governance
    JEL: Q58 P48
    Date: 2015
  5. By: William Larson (Federal Housing Finance Agency); Anthony M. Yezer
    Abstract: This paper develops a new open-city urban simulation model capable of showing the urban form and energy consumption effects of variation in city size. The model is able to consider city size differences caused by wage and amenity differentials, both with and without housing and land use regulation. The surprising conclusion is that per-capita energy use is relatively invariant to city size when growth is driven by wages but falls modestly with growth induced by rising amenity. Common land use policies, specifically density limits and greenbelts, can positively or negatively affect both city welfare and energy use.
    Keywords: urban simulation, congestion, commuting, gasoline, greenbelt
    JEL: Q40 R14
    Date: 2015–06
  6. By: Ruhnau, Oliver (RWTH Aachen University); Hennig, Patrick (Grundgrün Energie GmbH); Madlener, Reinhard (E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN))
    Abstract: Forecasts are usually evaluated in terms of accuracy. With regard to application, the question arises if the most accurate forecast is also optimal in terms of forecast related costs and risks. Combining insights from research and practice, we show that this is indeed not necessarily the case. Our analysis is grounded in the dynamic field of short-term forecasting of solar electricity feed-in. A clear sky model is implemented and combined with a linear model, an autoregressive model, and an artificial neural network. These models are applied to a portfolio of ten large-scale photovoltaic systems in Germany. We compare the different models in order to quantify the connection between errors and costs. We find that apart from accuracy, correlation with market prices is an important characteristic of forecasts when economic implications are considered as important.
    Keywords: Forecasting evaluation; renewable energy; electricity markets; balancing costs; artificial neural networks; clear sky model; Germany
    Date: 2015–06

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