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GTAP Resource #3559

"Darwinian pools? The evolution of factor market modelling in global CGE models."
by Shutes, Lindsay and Martin Banse

The construction and subsequent releases of the global database of international trade and domestic transactions (GTAP database) together with advances in computing, has made global CGE modelling possible over the last twenty years. Applications of global CGE models based on the GTAP databases range from trade liberalisation to climate change and now many of the key international institutes use and develop some form of global CGE model. Apart from the way of modelling intermediate demand in the different sectors, modelling of factor demand and supply is one of the most crucial assumptions in the ‘general set-up’ of the CGE model. The presentation of factor demand describes the ability of different sectors to react to changes in relative output prices and in longer-terms the economic structure of the economy.

This paper brings together the work done in key institutes into one paper with a focus on the various ways that factor markets are captured with global CGE models. We explore whether ‘Darwinian pools’ exist in which the separate development of models starting from a common base has led to significantly different ways of modelling factor markets.

The paper forms the starting point for the global modelling component of the EU FP7 project ‘Comparative Analysis of Factor Markets across the Member States’ as well as providing a resource to the GTAP community on the current state of factor market modelling in global CGE models. Also, we include a summary of innovations in single country factor market modelling.

We find that although the models may share a common database, and in many cases a common starting place in the GTAP model, that the modelling of factor markets differs significantly across models. By bringing together the developments in one place, the review is a resource for CGE-modellers wishing to extend the presentation of factor markets within their models.

Resource Details (Export Citation) GTAP Keywords
Category: 2011 Conference Paper
Status: Published
By/In: Presented at the 14th Annual Conference on Global Economic Analysis, Venice, Italy
Date: 2011
Created: Shutes, L. (4/14/2011)
Updated: Shutes, L. (4/14/2011)
Visits: 2,266
- Labor market issues
- Calibration and parameter estimation

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