nep-cmp New Economics Papers
on Computational Economics
Issue of 2017‒01‒15
fourteen papers chosen by

  1. Climate Change, Water Scarcity in Agriculture and the Economy-Wide Impacts in a CGE Framework By Roberto Ponce; Ramiro Parrado; Alejandra Stehr; Francesco Bosello
  2. Embedding the AMPLE in a CGE Model to Analyze Intersectoral and Economy-Wide Policy Issues By Briones, Roehlano M.
  3. Adaptive Large Neighborhood Search with a Constant-Time Feasibility Test for the Dial-a-Ride Problem By Timo Gschwind; Michael Drexl
  4. Decarbonization Pathways in Southeast Asia: New Results for Indonesia, Malaysia, Philippines, Thailand and Viet Nam By Francesco Bosello; Carlo Orecchia; David A. Raitzer
  5. When Buzz and Pipelines Fail By Christopher Esposito; David Rigby
  6. The Efficiency Cost of Protective Measures in Climate Policy By Christoph Böhringer; Xaquín Garcia-Muros; Ignacio Cazcarro; Iñaki Arto
  7. Cost-Effectiveness and Incidence of Renewable Energy Promotion in Germany By Christoph Böhringer; Florian Landis; Miguel Angel Tovar Reaños
  8. US Climate Policy: A Critical Assessment of Intensity Standards By Christoph Böhringer; Xaquín Garcia-Muros; Mikel Gonzalez-Eguino; Luis Rey
  9. The Cost of Climate Stabilization in Southeast Asia, a Joint Assessment with Dynamic Optimization and CGE Models By Francesco Bosello; Giacomo Marangoni; Carlo Orecchia; David A. Raitzer; Massimo Tavoni
  10. Physician emigration: should they stay or should they go? A policy analysis By Mário Amorim Lopes; Álvaro Almeida; Bernardo Almada-Lobo
  11. Output-Based Rebating of Carbon Taxes in the Neighbor's Backyard. Competitiveness, Leakage and Welfare By Christoph Böhringer; Brita Bye; Taran Faehn; Knut Einar Rosendahl
  12. Turkey's Role in Natural Gas - Becoming a Transit Country? By Berk, Istemi; Schulte, Simon
  13. Reactive Power Management of a DFIG Wind System in Microgrids Based on Economics of the System By Mahdavi, Sadegh; Amin Froutani-Fard, Amin
  14. Numerical analysis of an extended structural default model with mutual liabilities and jump risk By Vadim Kaushansky; Alexander Lipton; Christoph Reisinger

  1. By: Roberto Ponce (Universidad del Desarrollo); Ramiro Parrado (Fondazione Eni Enrico Mattei and Centro Euro-Mediterraneo sui Cambiamenti Climatici); Alejandra Stehr (Universidad de Concepción); Francesco Bosello (FEEM, CMCC and University of Milan)
    Abstract: This paper analyzes the economic impacts of changes in water availability due to climate change. We develop a new modeling approach as an alternative to include water as a production factor within a global CGE model. We tailor the structure of the ICES model to characterize the key features of the world economy with a detailed representation of the agricultural sector. In order to reach this objective, a new database has been built to explicitly consider water endowments, precipitation changes, and unitary irrigation costs. Results suggest different economic consequences of climate change depending on the specific region. Impacts are related to change in crop production, endowment demands, and international trade.
    Keywords: CGE Models, Climate Change, Agriculture, Irrigation, Water Resources
    JEL: C68 Q54 Q15 Q25
    Date: 2016–12
  2. By: Briones, Roehlano M.
    Abstract: This study implements an updated set of projections for Philippine agriculture, which addresses the following key issues: (1) the proper modeling of land allocation to better analyze the implications of land scarcity under climate change; (2) the impact of climate change, agricultural productivity growth, and trade liberalization on agriculture; (3) the indirect impacts of climate change and agricultural productivity growth on the rest of the economy; and (4) the impact of productivity growth in manufacturing and services on agriculture, including on agricultural wages. To address the first and second issues, the study provides a new approach toward modeling land allocation, and updated projections for agriculture to 2030 using the extended Agricultural Model for Policy Evaluation (AMPLE). The study will address the third and fourth issues by extending AMPLE into a computable general equilibrium (CGE) version, called AMPLE – CGE, which is still being developed. This report documents the compilation of the AMPLE – CGE data set, namely, the 2013 Social Accounting Matrix.
    Keywords: Philippines, area allocation, quasi-fixed factor, partial equilibrium model, constant elasticity of transformation, Agricultural Model for Policy Evaluation (AMPLE), computable general equilibrium (CGE), Philippine agriculture, Social Accounting Matrix, agricultural productivity
    Date: 2016
  3. By: Timo Gschwind (Johannes Gutenberg-University Mainz, Germany); Michael Drexl (Johannes Gutenberg-University Mainz, Germany and Deggendorf Institute of Technology)
    Abstract: In the dial-a-ride problem (DARP), user-specified transport requests from origin to destination points have to be served by a fleet of homogeneous vehicles. The problem variant we consider aims at finding a set of minimum-cost routes satisfying constraints on vehicle capacity, time windows, maximum route duration, and maximum user ride times. We propose an adaptive large neighborhood search (ALNS) for its solution. The key novelty of the approach is an exact amortized constant-time algorithm for evaluating the feasibility of request insertions in the repair steps of the ALNS. In addition, we use two optional improvement techniques: a local-search based, intra-route improvement of routes of promising solutions using the Balas-Simonetti neighborhood, and the solution of a set-partitioning model over a subset of all routes generated during the search. With these techniques, the proposed algorithm outperforms the state-of-the-art methods in terms of solution quality. New best solutions are found for several benchmark instances.
    Keywords: Dial-a-ride problem, Adaptive large neighborhood search, Feasibility testing
    Date: 2016–12–22
  4. By: Francesco Bosello (University of Milan, FEEM and CMCC); Carlo Orecchia (FEEM and CMCC); David A. Raitzer (Asian Development Bank)
    Abstract: Southeast Asia is one of the most vulnerable regions of the world to the impacts of climate change. At the same time, the region is also following a trajectory that could make it a major contributor to greenhouse gas emissions in the future. Understanding the economic implications of policy options for low carbon growth is essential to formulate instruments that achieve the greatest emissions reductions at lowest cost. This study focuses on five developing countries of Southeast Asia that collectively account for 90% of regional emissions in recent years—Indonesia, Malaysia, the Philippines, Thailand, and Viet Nam. The analyses are based on the CGE economy-energy-environment model ICES under an array of scenarios reflecting business as usual, fragmented climate policies, an approximately 2.4°C post 2020 global climate stabilization target, termed 650 parts per million (ppm) carbon dioxide (CO2) equivalent (eq), and an approximately 2°C global target (termed 500 ppm CO2 eq). Averted deforestation through reducing emissions from forest degradation and deforestation (REDD) is included in some scenarios. The study shows that global and coordinated action is found to be critical to the cost effectiveness of emissions stabilization policies. A 650ppm stabilization scenario (below 3°C in 2100) has a similar cost to the region to current fragmented targets, but achieves much higher levels of emissions reductions. However, only some of the countries have short-term emissions targets that are consistent with a stabilization scenario at 650ppm: these are Indonesia, Philippines and Viet Nam. None of the countries’ mid-term targets are coherent with more ambitious stabilization scenario at 500ppm.
    Keywords: Climate Change Mitigation, Asian Economies, Computable General Equilibrium Models
    JEL: Q54 Q58 C68
    Date: 2016–12
  5. By: Christopher Esposito; David Rigby
    Abstract: Explanations for why some cities outperform others frequently rest on the assumed benefits of local and global interaction. Within the Òbuzz and pipelinesÓ literature, the costs and returns to interaction have rarely been examined in formal settings. In this paper we extend research on knowledge sharing by modeling local and global interactions between firms distributed across city-regions. Our simulation model develops an evolutionary framework where firms explore and exploit knowledge sets that are accumulated over time by recombining technologies held by local and non-local firms. Our results make two contributions to the existing literature. First, we show why too much local interaction can induce technological lock-in and restrict citiesÕ innovative growth. Second, we illustrate that non-local interaction entails opportunity costs that can outweigh its benefits. Together, the results unearth the conditions under which local and non-local interactions strengthen the economies of cities and when they fail to do so. Length:
    Keywords: regional economic growth, innovation, networks, computer simulation
    JEL: R11 D83
    Date: 2017–01
  6. By: Christoph Böhringer (University of Oldenburg); Xaquín Garcia-Muros (Basque Centre for Climate Change (BC3), Students); Ignacio Cazcarro (Basque Centre for Climate Change (BC3)); Iñaki Arto (Basque Centre for Climate Change (BC3))
    Abstract: Despite recent achievements towards a global climate agreement, climate action to reduce greenhouse gas emissions remains quite heterogeneous across countries. Energy-intensive and trade-exposed (EITE) industries in industrialized countries are particularly concerned on stringent domestic emission pricing that may put them at a competitive disadvantage with respect to producers of similar goods in other countries without or only quite lenient emission regulation. This paper focuses on climate policy analysis for the United States of America (US) and compares the economic implications of four alternative protective measures for US EITE industries: (i) output-based rebates, (ii) exemptions from emission pricing, (iii) energy intensity standards, and (iv) carbon intensity standards. Based on simulations with a large-scale computable general equilibrium model for the global economy we quantify how these protective measures affect competitiveness of US EITE industries. We find that while protective measures can attenuate adverse competitiveness impacts measured in terms of common sector-specific competitiveness indicators, they run the risk of making US emission reduction much more costly than uniform emission pricing stand-alone. In fact, the cost increase is associated with negative income effects such that the gains of protective measures for EITE exports may be more than compensated through losses in domestic EITE demand.
    Keywords: unilateral climate policy, competitiveness, computable general equilibrium
    JEL: D21 H23 D58
    Date: 2016–10
  7. By: Christoph Böhringer (University of Oldenburg); Florian Landis (Centre for European Economic Research (ZEW)); Miguel Angel Tovar Reaños (Centre for European Economic Research (ZEW))
    Abstract: Over the last decade Germany has boosted renewable energy in power production by means of massive subsidies. The flip side are very high electricity prices which raises concerns that the transition cost towards a renewable energy system will be mainly borne by poor households. In this paper, we combine computable general equilibrium and microsimulation analysis to investigate the cost-effectiveness and incidence of Germany’s renewable energy promotion. We find that the regressive effects of renewable energy promotion could be attenuated by alternative subsidy financing mechanisms which achieve the same level of electricity generation from renewable energy sources.
    Keywords: renewable energy policy, feed-in tariffs, CGE, microsimulation
    JEL: Q42 H23 C63
    Date: 2016–10
  8. By: Christoph Böhringer (University of Oldenburg - Economic Policy; Centre for European Economic Research (ZEW)); Xaquín Garcia-Muros (Basque Centre for Climate Change (BC3), Students); Mikel Gonzalez-Eguino (Basque Centre for Climate Change (BC3)); Luis Rey (Basque Centre for Climate Change (BC3))
    Abstract: Intensity standards have gained substantial momentum as a regulatory instrument in US climate policy. Based on numerical simulations with a large-scale computable general equilibrium model we show that intensity standards may rather increase than decrease counterproductive carbon leakage. Moreover, standards can lead to considerable welfare losses compared to emission pricing via carbon taxation or an emissions trading system. The tradability of standards across industries is a mechanism that can reduce these negative effects.
    Keywords: unilateral climate policy; carbon leakage; intensity standards; computable general equilibrium
    JEL: D21 H23 D58
    Date: 2015–11
  9. By: Francesco Bosello (University of Milan, FEEM and CMCC); Giacomo Marangoni (FEEM and CMCC); Carlo Orecchia (FEEM and CMCC); David A. Raitzer (Asian Development Bank); Massimo Tavoni (Politecnico di Milano, FEEM and CMCC)
    Abstract: Southeast Asia is at a time one of the most vulnerable region to the impacts of a changing climate, with millions of its inhabitants still trapped in extreme poverty without access to energy and employed in climate-sensitive sectors, and, potentially, one of the world’s biggest contributors to global warming in the future. Fortunately, major Southeast Asian countries are also implementing policies to improve their energy and carbon efficiency and are discussing if and how to extend these further. The present study aims to assess the implications for energy consumption, energy intensity and carbon intensity in the Southeast Asia region of a set of short-term and long-term de-carbonization policies characterized by different degrees of ambition and international cooperation. The analysis applies two energy-climate-economic models. The first, the fully dynamic Integrated Assessment model WITCH, is more aggregated in the sectoral and country representation, but provides a detailed technological description of the energy sector. The second, the ICES Computable General Equilibrium model, offers a richer sectoral breakdown of the economy and of international trade patterns, but is less refined in the representation of technology. The joint application of these two complementary models allows the capture of distinct and key aspects of low- carbon development paths in Southeast Asia.
    Keywords: Climate Change Mitigation, Asian Economies, Computable General Equilibrium Models
    JEL: Q54 Q58 C68
    Date: 2016–12
  10. By: Mário Amorim Lopes (CEGI, Faculdade de Engenharia da Universidade do Porto, INESC-TEC); Álvaro Almeida (CEF.UP and Faculdade de Economia, Universidade do Porto); Bernardo Almada-Lobo (CEGI, Faculdade de Engenharia da Universidade do Porto, INESC-TEC)
    Abstract: Physician emigration can either function as an escape valve to help the health labour market clear from a supply surplus, or aggravate the problem further in case of a shortage. Either way, policy-makers should be particularly aware and devise policies to minimize the occurrence of an imbalance in the physician workforce, which may require physician retention policies if barriers to entry and other market rigidities can not be removed. To this purpose we have developed an agent-based computational economics model to analyse physician emigration, and used it to study the impact of potential short-term and long-term retention policies. As a real case study we have calibrated it with data from Portugal, which features a very particular health system with many rigidities. Results show that all policies are capable of increasing the workforce size, but not all reduce migration. Furthermore, the welfare impact of the policies varies considerably. Whether policies to retain physicians should be enacted or whether policy makers should let physicians go will depend on the type of imbalance present in the health system.
    Keywords: Healthcare workforce planning; Health policy; Agent-based computational economics; International migration; Physician migration; International medical graduates
    JEL: I18 I19 I28 J61
    Date: 2017–01
  11. By: Christoph Böhringer (University of Oldenburg); Brita Bye (Statistics Norway - Research Department); Taran Faehn (Statistics Norway - Research Department); Knut Einar Rosendahl (Norwegian University of Life Sciences; Statistics Norway - Research Department)
    Abstract: We investigate how carbon taxes combined with output-based rebating (OBR) in an open economy perform in interaction with the carbon policies of a large neighboring trading partner. Analytical results suggest that whether the purpose of the OBR policy is to compensate firms for carbon tax burdens or to maximize welfare (accounting for global emission reductions), the second-best OBR rate should be positive in most cases. Further, it should fall with the introduction of carbon taxation in the neighboring country, particularly if the neighbor refrains from OBR. Numerical simulations for Canada with the US as the neighboring trading partner, indicates that the impact of US policies on the second-best OBR rate will depend crucially on the purpose of the domestic OBR policies. If the aim is to restore the competitiveness of domestic emission-intensive, trade exposed (EITE) firms at the same level as before the introduction of its own carbon taxation for a given US carbon policy, we find that the domestic optimal OBR rates are relatively insensitive to the foreign carbon policies. If the aim is to compensate the firms for actions taken by the US following a Canadian carbon tax, the necessary domestic OBR rates will be lower if also the US regulates its emissions, particularly if the US refrains from OBR. If the goal is rather to increase the efficiency of Canadian policies in an economy-wide sense by accounting for carbon leakage, the US policies have but a minor reducing impact on domestic optimal OBR rates.
    Keywords: carbon leakage, second-best optimal carbon policies, output-based rebates
    JEL: Q43 Q54 H2 D61
    Date: 2015–11
  12. By: Berk, Istemi (Dokuz Eylul University, Iszmir, Turkey); Schulte, Simon (Energiewirtschaftliches Institut an der Universitaet zu Koeln (EWI))
    Abstract: This paper analyses the possible future role that Turkey can play in European natural gas markets. We employ a global gas market simulation model, COLUMBUS, to assess the outcomes of different scenarios concerning natural gas supply routes to Europe through Turkey up to 2030. The results imply simply that under current conditions, i.e., a more competitive environment in European gas markets leading to low gas prices, Turkey’s role would be of only minor importance. In accordance with various scenarios presented in this study, Turkey’s role is seen at its most important when European demand increases and Russia exerts power in the European markets.
    Keywords: COLUMBUS; European Gas Supply; Turkey; Scenario Analyses
    JEL: C68 L13 Q31
    Date: 2017–01–06
  13. By: Mahdavi, Sadegh; Amin Froutani-Fard, Amin
    Abstract: Due to significant line resistances in microgrids, active power variations produced by wind turbine can lead to significant fluctuations in voltage magnitudes and as a result economic of the grid. This project proposes a voltage sensitivity analysis-based scheme to achieve voltage regulation at a target bus in such microgrids. The method is local and can be implemented in the absence of widespread communication system or remote measurement. The economic performance of the method is illustrated on the IEEE-13 bus distribution network. Dynamic simulations (in PSCAD/EMTDC) are presented to assess the voltage regulation characteristics.
    Keywords: Optimization, Economic, Microgrid
    JEL: L0
    Date: 2017–01–05
  14. By: Vadim Kaushansky; Alexander Lipton; Christoph Reisinger
    Abstract: We consider a structural default model in an interconnected banking network as in Lipton [International Journal of Theoretical and Applied Finance, 19(6), 2016], with mutual obligations between each pair of banks. We analyse the model numerically for two banks with jumps in their asset value processes. Specifically, we develop a finite difference method for the resulting two-dimensional partial integro-differential equation, and study its stability and consistency. We then compute joint and marginal survival probabilities, as well as prices of credit default swaps (CDS), first-to-default swaps (FTD), credit and debt value adjustments (CVA and DVA). Finally, we calibrate the model to market data and assess the impact of jump risk.
    Date: 2016–12

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