Book contents
- Frontmatter
- Contents
- List of Contributors
- Acknowledgments
- Introduction
- Part One General Equilibrium Theory
- Part Two Computational Methods
- Part Three Macroeconomics and Finance
- Part Four Public Finance, Development, and Climate Change
- Part Five General Equilibrium Restrictions and Estimation of Hedonic Models
- Part Six Policy Uses and Performance of AGE Models
- 13 An Evaluation of the Performance of Applied General Equilibrium Models on the Impact of NAFTA
- 14 Decompositional Analysis Using Numerical Equilibrium Models: Illustrations from Trade Literature
- 15 The Influence of Computable General Equilibrium Models on Policy
- Index
15 - The Influence of Computable General Equilibrium Models on Policy
Published online by Cambridge University Press: 14 January 2010
- Frontmatter
- Contents
- List of Contributors
- Acknowledgments
- Introduction
- Part One General Equilibrium Theory
- Part Two Computational Methods
- Part Three Macroeconomics and Finance
- Part Four Public Finance, Development, and Climate Change
- Part Five General Equilibrium Restrictions and Estimation of Hedonic Models
- Part Six Policy Uses and Performance of AGE Models
- 13 An Evaluation of the Performance of Applied General Equilibrium Models on the Impact of NAFTA
- 14 Decompositional Analysis Using Numerical Equilibrium Models: Illustrations from Trade Literature
- 15 The Influence of Computable General Equilibrium Models on Policy
- Index
Summary
ABSTRACT: This paper reviews experience with the use of computable or applied general equilibrium (CGE or AGE) models to affect public policy. The range of issues on which CGE models have had an influence is quite wide, and includes structural adjustment policies, international trade, public finance, agriculture, income distribution, and energy and environmental policy. In the cases where CGE models have enlightened the policy debate, the reasons have to do with one or more of the following: (i) consistency between results from CGE models and other types of analysis (for instance, in the debate on NAFTA); (ii) the fact that the CGE models captured particular features of the economy, such as some structural rigidities and institutional constraints, that rules of thumb, based on simpler analysis, failed to capture; or (iii) the fact that CGE models provided a consistent framework to assess linkages and tradeoffs among different policy packages. We also consider misuses of CGE models in policy debates. Most of these stem from (i) pushing the model beyond its domain of applicability; (ii) violating the principle of Occam's razor – use of the simplest model suited to the task; (iii) the “black box syndrome” – results whose link with the policy change is opaque. In assessing the use of models in policy, it is important to distinguish between stylized and applied models. Both have been used in policy debates, but there are important differences in their uses, particularly in their domain of applicability.
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- Information
- Frontiers in Applied General Equilibrium ModelingIn Honor of Herbert Scarf, pp. 402 - 428Publisher: Cambridge University PressPrint publication year: 2005
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