nep-cmp New Economics Papers
on Computational Economics
Issue of 2016‒06‒14
thirteen papers chosen by
Stan Miles
Thompson Rivers University

  1. An Economy-wide Analysis of Trade Liberalization Impacts on Rural Household Income in Taiwan By Hsu, Shih-Hsun; Chang, Ching-Cheng; Lin, Hsing-Chun; Liou, Ruey-Wan; Hsu, Sheng-Ming; Hsieh, Te-Yen; Lin, Kuo-Jung
  2. Demand Forecasting and Activity-based Mobility Modeling from Cell Phone Data By Pozdnukhov, Alexey
  3. Cash management and payment choices: a simulation model with international comparisons By Arango, Carlos; Bouhdaoui, Yassine; Bounie, David; Eschelbach, Martina; Hernandez, Lola
  4. Potential Poverty Effects of the Special Safeguard Mechanism: the Case of Wheat By Countryman, Amanda; Ufer, Danielle
  5. Implications of Seasonal Price and Productivity Changes at the Household Level in Uganda - A Heterogeneous Agent Approach By Musumba, Mark; Zhang, Yuquan W.
  7. Trade Creation and Diversion under NAFTA: The North American Strawberry Market By Lee, Youngjae; Kennedy, Lynn
  8. Evaluating economic threshold for dynamically optimal disease management By Liu, Yangxuan; Small, Ian; Langemeier, Michael; Gramig, Benjamin; Preckel, Paul; Joseph, Laura; Wu, Yuanhan; Fry, William
  9. Demographic Change and Fiscal Sustainability in Asia By LEE Sang-Hyop; KIM Jungsuk; PARK Donghyun
  10. Some Mathematical Aspects of Price Optimisation By Y. Bai; E. Hashorva; G. Ratovomirija; M. Tamraz
  11. Climate change interactions with agriculture, forestry sequestration, and food security By Pena-Levano, Luis M; Taheripour, Farzad; Tyner, Wallace E
  13. Synchronization in human decision making By Yi-Fang Liu; Jørgen Vitting Andersen; Maxime Frolov; Philippe de Peretti

  1. By: Hsu, Shih-Hsun; Chang, Ching-Cheng; Lin, Hsing-Chun; Liou, Ruey-Wan; Hsu, Sheng-Ming; Hsieh, Te-Yen; Lin, Kuo-Jung
    Abstract: As Blank (2008, p. 302) notes, off-farm income earned by farm household plays at least two major roles in agriculture. In a macroeconomic role, off-farm income is a neglected index of a country’s economic development. In a microeconomic role, off-farm income is one of the most important risk management tools available to farm households. Blank (2008, p. 133) further emphasizes, “Currently, economy-wide demand for labor is the engine of “growth” in American agriculture. A growing real wage is a sufficient condition for rural household income growth.” Gardner (2005) also points out that this is the dominant explanation for the catch-up of farm to urban household income levels observed over recent decades in the U.S. Like in the U.S., off-farm income represents a high and generally increasing percentage of average farm operator household income in Taiwan. Off-farm income accounted for about 80 percent of total farm household income in 2014. The contribution of off-farm income for farm household and rural development are too important to be ignored. In recent decades, the major trends of commercialization, globalization, science and technology are all ongoing and interrelated. The impacts of trade liberalization (e.g., WTO, FTA, or TPP) on Taiwan’s agriculture sector has been an important issue in policy debates. Most of the debates focus on decreases in major indicators, e.g., total output value in production agriculture sector, food security, food self-sufficiency rate and on-farm income of farm household. Almost all of them neglect or ignore those potential increases in off-farm employment and income from local economic growth with trade liberalization. For the research methodology, Irwin et al. (2010) provide a selected review of the economics literature over the past 100 years with a focus on the economic transformation of rural places and conclude that “Rural development is a general equilibrium problem that requires general equilibrium tools.” The development of computable general equilibrium (CGE) modeling techniques by agricultural economists has been a major contribution to the entire economics profession and rural development, in particular. Computable general equilibrium models are the only ones that endogenously determine primary factor supplies as well as all prices and incomes in an economy. In this study, we built the SAM-based GEMTEE (General Equilibrium Model for Taiwanese Economy and Environment) model—a recursive dynamic computable general equilibrium (CGE) model that depicts the economy of Taiwan and its demographic structure through time—a flexible mechanism to reflect how fertility respond to income and demographic policies, as well as demographers’ perspectives. The GEMTEE model is a CGE model derived from the Monash-type CGE model (Dixon and Rimmer 2002) and is calibrated to the 2006 Social Accounting Matrix of Taiwan as the benchmark. We use cross-strait trade liberalization as a case study. The 57 sectors of GTAP (Global Trade analysis Project) dataset and 166 sectors of Taiwan’s Input-Output Tables are aggregated into four major sectors: agriculture, agro-processing, manufacture and services. With all tariff rates eliminated from bilateral trade between China and Taiwan, GTAP simulations produce different import and export price changes to both economies. We then use SAM-based GEMTEE model to simulate the impacts of cross-strait trade liberalization on Taiwan’s economy, agriculture output off-farm income, farm household income and employment. Simulation results demonstrate that Taiwan’s GDP will increase by 1.78%, but total agriculture output will decrease by 0.9%. For per farm household income, although on-farm income decreases by NT$1,648, off-farm income will increase by NT$10,580. In total, per farm household income increases by NT$8,932 with cross-strait trade liberalization. With trade liberalization as the engine of growth and trade adjustment assistance (TAA) mechanism in work, economic growth in Taiwan’s agriculture may be maintained and in the long run off-farm income and employment will increase to provide a “safety net” for rural households.
    Keywords: Trade liberalization, off-farm income, rural household income, Computable General Equilibrium (CGE), Social Accounting Matrix (SAM), Community/Rural/Urban Development, International Relations/Trade,
    Date: 2016
  2. By: Pozdnukhov, Alexey
    Abstract: This project develops machine learning algorithms and methods for processing of cell phone location logs to generate travel behavior data. The project initially focuses on bias correction and activity inference for generating activity-based travel demand models. Inferred activity chains are used to calibrate an agent-based traffic micro-simulation for the SF Bay Area, and validated on loop detector counts.
    Keywords: Engineering, activity-based travel demand models, cellular data, machine learning, agent-based simulation
    Date: 2016–03–31
  3. By: Arango, Carlos; Bouhdaoui, Yassine; Bounie, David; Eschelbach, Martina; Hernandez, Lola
    Abstract: Despite various payment innovations, today, cash is still heavily used to pay for low-value purchases. This paper proposes a simulation model based on two optimal cash management and payment policies in the payments economics literature to explain cash usage. First, cash is preferred to other payment instruments whenever consumers have enough balances at hand. Second, it is optimal for consumers to hold a stock of cash for precautionary reasons. Exploiting survey payment diaries from Canada, France, Germany and the Netherlands, the results of the simulations show that both optimal policies are well suited to understand the high shares of low-value cash payments in Canada, France and Germany. Yet, they do not perform as well in the case of the Netherlands, overestimating the share of low-value cash payments. We discuss how the differences in payment markets across countries may explain the limitations of the two optimal policies.
    Keywords: cash management, payment choices, international comparison
    JEL: C61 E41 E47
    Date: 2015–11–25
  4. By: Countryman, Amanda; Ufer, Danielle
    Abstract: Negotiations under the Doha Development Agenda include provisions for a Special Safeguard Mechanism (SSM). The SSM would allow developing countries to invoke an additional duty on agricultural commodity imports when prices fall below a specified price trigger (P-SSM) or net imports rise above a specified quantity trigger (Q-SSM). This research uses a Computable General Equilibrium (CGE) modeling framework to evaluate the potential poverty effects of the SSM in agriculture. Some argue that the SSM is necessary to protect developing country domestic producers from the variability in world commodity markets; however, existing research suggests that widespread use of the SSM may destabilize world prices and increase the cost of commodity imports for domestic consumers. Many of the main arguments in favor of the SSM focus on the well-being of vulnerable agricultural producers, yet many rural residents in poor countries are net purchasers of food, and urban poverty is a growing concern. Therefore, the potential for an SSM policy to mitigate poverty vulnerability seems unlikely. This research aims to augment the existing literature regarding proposed trade reform in the WTO by investigating the potential implications of the SSM on poverty in Brazil and Mexico by implementing the policy in the global wheat market.
    Keywords: Special Safeguard Mechanism, World Trade Organization, International Trade, Trade Policy, Agricultural and Food Policy, International Relations/Trade,
    Date: 2016
  5. By: Musumba, Mark; Zhang, Yuquan W.
    Abstract: Developing economies are affected by price and productivity changes and this was evident during the 2007-2008 world food crisis and the 2010-2011 food price surge. For this study, we use a heterogeneous-agent modelling approach to simulate production and consumption responses of a household producing bananas (matooke), beans and maize; three of the top five staple food crops by per capita calorie intake in Uganda. Preliminary results focusing on maize producing households indicate substitution of maize for other items when market prices increase. Please note that complete results are pending and this work will be updated.
    Keywords: farm heterogeneity, computable general equilibrium model, maize productivity, price, Food Consumption/Nutrition/Food Safety, International Development, Production Economics, C61, Q12,
    Date: 2016–05
    Date: 2016
  7. By: Lee, Youngjae; Kennedy, Lynn
    Abstract: In order to identify the effect on trade creation and diversion of NAFTA in the North American strawberry market, this study conducts a partial equilibrium analysis by using the CES utility and production functions of Dixit and Stiglitz which provide necessary equations to estimate unobservable final prices of imported strawberries and non-tariff trade costs. Based on the results of this study, we could confirm that 1) the effect on trade creation of NAFTA is greater than the effect on trade diversion, which leads to positive effect of NAFTA on the North American strawberry market, 2) the difference between the local price and the imported price might be due to high non-tariff trade costs that exist between borders, 3) market integration simulation shows trade creation of 453% and no trade diversion, and 4) market segregation simulation shows that trade volume in the regional market decreases by 26% and trade volume out of regional market increases by 1045%.
    Keywords: NAFTA, Trade Creation, Trade Diversion, Strawberries., Agricultural and Food Policy, Demand and Price Analysis, International Relations/Trade, F10, F13, F14, F18, O19, Q17, Q54.,
    Date: 2016–07–31
  8. By: Liu, Yangxuan; Small, Ian; Langemeier, Michael; Gramig, Benjamin; Preckel, Paul; Joseph, Laura; Wu, Yuanhan; Fry, William
    Abstract: Precision agriculture has emerged as a revolutionary technology in helping make farm decisions. It transforms farm related data into information, and then coverts information into useful knowledge for decision-making. This study evaluates economic thresholds for a new web-based decision support system developed for precision fungicide management for potato production. Using 10 years of computer simulation experiments from 152 locations in the United States, we compared different thresholds in terms of disease severity, fungicide usage efficiency, and net income over fungicide cost to manage potato late blight disease. The empirical results show that the economic thresholds improved disease suppression and farming profit relative to the previous critical thresholds while maintaining fungicide use efficiency.
    Keywords: Crop Production/Industries, Farm Management, Production Economics, Research and Development/Tech Change/Emerging Technologies, Resource /Energy Economics and Policy, Economic threshold, stochastic optimization, precision farming, disease management, late blight,
    Date: 2016
  9. By: LEE Sang-Hyop (East-West Center and University of Hawaii); KIM Jungsuk (Institute of International and Area Studies, Sogang University, Korea); PARK Donghyun (Asian Development Bank, Manila, Philippines)
    Abstract: Changes in the population age structure can have a significant effect on fiscal sustainability since they can affect both government revenue and expenditure. For example, population ageing will increase expenditure on the elderly while reducing potential growth and hence revenue. In this paper, we project government revenue, expenditure, and fiscal balance in developing Asia up to 2050. Using a simple stylised model and the National Transfer Accounts (NTA) data set, we simulate the effect of both demographic changes and economic growth. Rapidly ageing countries like the Republic of Korea, Japan, and Taiwan, are likely to suffer a tangible deterioration of fiscal sustainability under their current tax and expenditure system. On the other hand, rapid economic growth can improve fiscal health in poorer countries with relatively young populations and still growing working-age populations. Overall, our simulation results indicate that Asia’s population ageing will adversely affect its fiscal sustainability, pointing to a need for Asian countries to further examine the impact of demographic shifts on their fiscal health.
    Keywords: Fiscal projection, tax, public spending, fiscal balance, population ageing, Asia
    JEL: J11 J14 H20 H50 H62
    Date: 2016–03
  10. By: Y. Bai; E. Hashorva; G. Ratovomirija; M. Tamraz
    Abstract: Calculation of an optimal tariff is a principal challenge for pricing actuaries. In this contribution we are concerned with the renewal insurance business discussing various mathematical aspects of calculation of an optimal renewal tariff. Our motivation comes from two important actuarial tasks, namely a) construction of an optimal renewal tariff subject to business and technical constraints, and b) determination of an optimal allocation of certain premium loadings. We consider both continuous and discrete optimisation and then present several algorithmic sub-optimal solutions. Additionally, we explore some simulation techniques. Several illustrative examples show both the complexity and the importance of the optimisation approach.
    Date: 2016–05
  11. By: Pena-Levano, Luis M; Taheripour, Farzad; Tyner, Wallace E
    Abstract: We evaluate the impacts of using carbon taxes and forest carbon sequestration to achieve 50% emission reductions. We consider four cases – carbon tax-only, combination of a carbon tax and equivalent sequestration subsidy, and the inclusion of crop yield shocks due to climate change in both policies (with 50% emissions reduction). We developed a new version of a computable general equilibrium model to do the analysis. We find that the tax/subsidy case causes substantial increases in food prices because of land competition between forest sequestration and crop production. When the climate induced yield shocks are added, the food price increases are huge – so large that it is clear this approach could not be adopted in the real world. We also compare a case with no mitigation and crop yield shocks appropriate for that case. The results suggest economic well-being falls more in that case than with 50% emission reductions.
    Keywords: Forestry, carbon sequestration, food security, general equilibrium, climate change, crop yield, mitigation methods, Agricultural and Food Policy, Environmental Economics and Policy, Food Security and Poverty, International Development, International Relations/Trade, Land Economics/Use, Q15, R52, Q54,
    Date: 2016
    Date: 2016
  13. By: Yi-Fang Liu (College of Management and Economics - Tianjin University); Jørgen Vitting Andersen (Centre d'Economie de la Sorbonne); Maxime Frolov (Centre d'Economie de la Sorbonne); Philippe de Peretti (Centre d'Economie de la Sorbonne)
    Abstract: Just like soldiers crossing a bridge in sync can lead to a catastrophic failure, we show via experiments, theory, and simulations, how synchronization in human decision making can lead to extreme outcomes. Individual decision making and risk taking are well known to be gender dependent. Much less is however understood about gender's impact on the creation of collective risk through aggregate decision making, where the decision of one individual can affect the decision making of other individuals, eventually leading to synchronization in behavior. To study the formation of collective risk created due to synchronization in human decision making, we have devised a series of experiments that can be analyzed and understood within a game theoretical framework. In the experiments each individual in groups of either men or women decide to buy or sell a financial asset based on an information set containing past price behavior. Risk can be generated collectively through coordination in the aggregate decision making, which leads to a price formation far from the fundamental value of the asset. Here we show how collective risks can be generated in groups of both genders, but the pathway to formation of collective risks happens through an individual risk taking which are different for groups composed of men respectively women. A priori we find that it is impossible to know whether a given group will engage in the formation of collective risk, but via a fluctuation based game theoretical framework we are able to estimate the likelihood that it will happen. Our results highlight some of the foundations for creation of excessive collective risks relevant for example in the understanding of financial systemic risks
    Keywords: collective decision making; synchronization; agent based modeling
    JEL: G1 G12 G14
    Date: 2016–03

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