nep-cmp New Economics Papers
on Computational Economics
Issue of 2016‒03‒17
four papers chosen by

  1. Combining Price and Quantity Controls under Partitioned Environmental Regulation By Sebastian Rausch; Jan Abrell
  2. The diamond model of social response within an agent-based approach By Paul R. Nail; Katarzyna Sznajd-Weron
  3. Egypt : guiding reform of energy subsidies long-term By Griffin,Peter; Laursen,Thomas Blatt; Robertson,James W.
  4. Input vs. output taxation – a DSGE approach to modelling resource decoupling By Marek Antosiewicz; Jan Witajewski-Baltvilks; Piotr Lewandowski

  1. By: Sebastian Rausch (ETH Zurich, Switzerland); Jan Abrell (ETH Zurich, Switzerland)
    Abstract: This paper analyzes hybrid emissions trading systems (ETS) under partitioned environmental regulation when firms’ abatement costs and future emissions are uncertain. We show that hybrid policies that introduce bounds on the price or the quantity of abatement provide a way to hedge against differences in marginal abatement costs across partitions. Price bounds are more efficient than abatement bounds as they also use information on firms’ abatement technologies while abatement bounds can only address emissions uncertainty. Using a numerical stochastic optimization model with equilibrium constraints for the European carbon market, we find that introducing hybrid policies in EU ETS reduces expected excess abatement costs of achieving targeted emissions reductions under EU climate policy by up to 89 percent. We also find that under partitioned regulation there is a high likelihood for hybrid policies to yield sizeable ex-post cost reductions.
    Keywords: Emissions trading, Partitioned environmental regulation, Uncertainty, Prices, Quantities, EU ETS
    JEL: H23 Q54 C63
    Date: 2016–03
  2. By: Paul R. Nail; Katarzyna Sznajd-Weron
    Abstract: Models of social response concern the identification and delineation of possible responses to social pressure. Most models are based on simple one-dimensional conceptualizations of conformity and its alternatives even though more sophisticated models have been available for a number of years. The diamond model is perhaps the most refined of the two-dimensional formulations. It is particularly useful in building agent-based models of opinion dynamics because it gives clear and explicit operational definitions of basic types of social response. In fact, the diamond model is actually a ready recipe for a microscopic model of opinion dynamics. Moreover, it fits quite well Einstein's "simple but no simpler" strategy. In this work, we will present the logic of the diamond model as well as its implications for agent-based modeling.
    Keywords: Opinion dynamics; Agent-based model; Social response; q-voter model; Diamond model
    JEL: C63 D7 D85
    Date: 2016–02–26
  3. By: Griffin,Peter; Laursen,Thomas Blatt; Robertson,James W.
    Abstract: This paper examines the short- and long-run economic impact of Egypt's energy subsidy reform in July 2014 (without and without compensating transfers for the bottom 40 percent of the income distribution) and the decline in global energy prices, as well as the long-run impact of phasing out the energy subsidies over a 5 year period. The analysis uses a Computable General Equilibrium model with 56 productive sectors, including 11 energy subsectors. The short-run analysis employs a two-stage factor market adjustment, with wages first fixed and then flexible. The long-run analysis is run in a recursive dynamic mode, capturing the impact of improved productivity and increased investment resulting from more efficient allocation of resources and reduction in government deficits. In the short run, the 2014 reforms lead to slightly lower consumption while investment increases strongly and production shifts from highly subsidized energy-intensive sectors such as energy, water and sanitation, and transport to other sectors (notably construction). The impact on overall consumer prices is limited. In the longer run, real GDP growth increases by about one percentage point relative to the baseline before the 2014 reform.
    Keywords: Economic Theory&Research,Energy Production and Transportation,Environment and Energy Efficiency,Energy and Environment,Transport Economics Policy&Planning
    Date: 2016–02–19
  4. By: Marek Antosiewicz; Jan Witajewski-Baltvilks; Piotr Lewandowski
    Abstract: Environmental taxes constitute a crucial instrument aimed at reducing resource use through lower production losses, resource-leaner products and more resource-efficient production processes. In this paper we focus on material use and apply a multisector DSGE model to study two types of taxation: tax on material inputs used by industry, energy, construction and transport sectors, and tax on output of these sectors. We allow for endogenous adaption of resource saving technologies. We calibrate the model for the EU27 area using IO matrix. We consider taxation introduced from 2021 and simulate its impact until 2050. We compare the taxes along their ability to induce reduction in material use and raise revenue. We also consider the effect of spending this revenue on reduction of labour taxation. We find that input and output taxation create contrasting incentives and have opposite effects on resource efficiency. The material input tax induces investment in efficiency improving technology which in the long term results in GDP and employment by 15-20% higher in comparison to comparable output tax. We also find that using revenues to reduce taxes on labour has stronger beneficial effects for the input tax.
    Keywords: DSGE model; resource decoupling; technological change; environmental taxes; environmental policy; double dividend
    JEL: C68 Q32 Q43
    Date: 2016–02

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.