This volume provides a practical guide to building and using simulation models for international trade theory and policy. Through a sequence of carefully constructed and fully documented programs, the volume illustrates how GAMS can be used to analyze a wide array of problems. Modern computable general equilibrium (CGE) models for trade policy are challenging in their complexity, but can be thought of as constructions of much simpler building blocks. By developing the building blocks in a consistent manner, and then putting them together in more complex and interesting ways, the volume makes CGE accessible to anyone with a background in microeconomics/trade theory. The volume will be useful to graduate students and researchers in international trade looking for a detailed guide to building simulation models and to developing the skill set necessary to enter into the world of CGE modeling.
Preface vii
Acknowledgments xi
List of Figures xiii
List of Tables xv
1 Introduction 1 (8)
1.1 CGE Models 4 (2)
1.2 Volume Organization 6 (3)
2 Getting Started With GAMS 9 (6)
2.1 What Is GAMS? 9 (1)
2.2 Getting and Installing GAMS 9 (1)
2.3 A Quick GAMS Primer 10 (4)
2.3.1 Echo Prints 12 (1)
2.3.2 Equation Listing 12 (1)
2.3.3 Model Statistics 13 (1)
2.3.4 Status Reports 13 (1)
2.3.5 Solution Reports 14 (1)
2.4 Exercises 14 (1)
2.5 Further Reading 14 (1)
Theory of Consumption, Production and Trade 15 (140)
3 Utility Maximization 17 (12)
3.1 Formal Problem 17 (1)
3.2 Example 18 (2)
3.3 Set Notation 20 (1)
3.4 GAMS Implementation 20 (4)
3.5 Exercises 24 (3)
3.6 Further Reading 27 (2)
4 Cost Minimization 29 (8)
4.1 Formal Problem 29 (1)
4.2 Example 30 (2)
4.3 Set Notation 32 (1)
4.4 GAMS Implementation 32 (2)
4.5 Exercises 34 (1)
4.6 Further Reading 35 (2)
5 Long-Run Production 37 (8)
5.1 Formal Problem 37 (3)
5.2 Example 40 (1)
5.3 Set Notation 41 (1)
5.4 GAMS Implementation 41 (3)
5.5 Exercises 44 (1)
5.6 Further Reading 44 (1)
6 Short-Run Production 45 (10)
6.1 Formal Problem 45 (2)
6.2 GAMS Implementation 47 (3)
6.3 Exercises 50 (1)
6.4 Further Reading 51 (4)
7 Dual Approach 55 (10)
7.1 Formal Problem 55 (4)
7.2 Example 59 (1)
7.3 Set Notation 60 (1)
7.4 GAMS Implementation 60 (2)
7.5 Exercises 62 (1)
7.6 Further Reading 63 (2)
8 Transition 65 (8)
8.1 Formal Problem 65 (1)
8.2 GAMS Implementation 66 (4)
8.3 Exercises 70 (1)
8.4 Further Reading 71 (2)
9 Higher Dimensions 73 (8)
9.1 Formal Problem 73 (2)
9.2 GAMS Implementation 75 (4)
9.3 Exercises 79 (1)
9.4 Further Reading 80 (1)
10 Intermediate Inputs 81 (12)
10.1 Formal Problem 81 (2)
10.2 Nested Functional Forms 83 (1)
10.3 Fixed Proportions Case 84 (3)
10.4 Variable Proportions Case 87 (4)
10.5 Exercises 91 (1)
10.6 Further Reading 92 (1)
11 Autarky 93 (8)
11.1 Formal Problem 93 (2)
11.2 GAMS Implementation 95 (2)
11.3 Exercises 97 (4)
12 Small Country Trading Equilibrium 101 (8)
12.1 Formal Problem 101 (2)
12.2 GAMS Implementation 103 (4)
12.3 Exercises 107 (2)
13 Non-traded Goods 109 (8)
13.1 Formal Problem 109 (2)
13.2 GAMS Implementation 111 (3)
13.3 Exercises 114 (1)
13.4 Further Reading 115 (2)
14 Large Country Trading Equilibrium 117 (6)
14.1 Formal Problem 117 (2)
14.2 The Foreign Offer 119 (1)
14.3 GAMS Implementation 120 (2)
14.4 Exercises 122 (1)
14.5 Further Reading 122 (1)
15 Two Country Trading Equilibrium 123 (12)
15.1 Formal Problem 123 (5)
15.2 GAMS Implementation 128 (4)
15.3 Exercises 132 (1)
15.4 Further Reading 132 (3)
16 Higher Dimensions and Trade 135 (4)
16.1 Formal Problem 135 (2)
16.2 GAMS Implementation 137 (1)
16.3 Exercises 138 (1)
16.4 Further Reading 138 (1)
17 Reciprocal Dumping 139 (8)
17.1 Reciprocal Dumping 139 (2)
17.2 GAMS Implementation 141 (4)
17.3 Exercises 145 (1)
17.4 Further Reading 146 (1)
18 Monopolistic Competition 147 (8)
18.1 Closed Economy 147 (2)
18.2 Open Economy 149 (1)
18.3 GAMS Implementation 150 (3)
18.4 Exercises 153 (1)
18.5 Further Reading 153 (2)
Commercial Policy and Distortions 155 (50)
19 Tariffs and Other Trade Interventions 157 (16)
19.1 Formal Problem for Small Country 157 (4)
19.2 GAMS Implementation 161 (1)
19.3 Quotas 162 (1)
19.4 Large Countries 163 (2)
19.5 Two Countries 165 (2)
19.6 Exercises 167 (5)
19.7 Further Reading 172 (1)
20 Domestic Taxes and Subsidies 173 (10)
20.1 Production Taxes/Subsidies 173 (1)
20.2 Consumption Taxes/Subsidies 174 (2)
20.3 Factor Taxes and Subsidies 176 (1)
20.4 GAMS Implementation 177 (2)
20.5 Exercises 179 (3)
20.6 Further Reading 182 (1)
21 Factor Market Distortions 183 (22)
21.1 Wage Differentials 183 (4)
21.2 Sticky Wages 187 (7)
21.3 Sector-Specific Sticky Wages 194 (5)
21.4 Imperfect Factor Mobility 199 (2)
21.5 Exercises 201 (2)
21.6 Further Reading 203 (2)
Computable General Equilibrium 205 (58)
22 Multiple Households and Other Sources of 207 (10)
Demand
22.1 Exchange Model 207 (5)
22.2 Production and Trade 212 (2)
22.3 Government and Investment 214 (2)
22.4 Exercises 216 (1)
23 Armington Preferences 217 (8)
23.1 Formal Problem 217 (3)
23.2 Example 220 (1)
23.3 GAMS Implementation 221 (2)
23.4 Exercises 223 (1)
23.5 Further Reading 224 (1)
24 Joint Production 225 (6)
24.1 Formal Problem 225 (2)
24.2 Example 227 (1)
24.3 GAMS Implementation 228 (2)
24.4 Exercises 230 (1)
24.5 Further Reading 230 (1)
25 Social Accounting Matrices 231 (12)
25.1 SAM Structure 231 (6)
25.1.1 Closed Economy SAM 232 (1)
25.1.2 Open Economy SAM 233 (1)
25.1.3 Intermediates, Government and 234 (1)
Investment
25.1.4 Indirect Taxes 235 (2)
25.2 Sources of SAMs 237 (1)
25.3 Balancing a SAM 238 (3)
25.4 Exercises 241 (1)
25.5 Further Reading 241 (2)
26 Closure 243 (8)
26.1 Microeconomic Closure 243 (2)
26.2 Macroeconomic Closure 245 (3)
26.2.1 Closed Economy 245 (2)
26.2.2 Open Economy 247 (1)
26.3 Money, Wealth, Taxes and Quotas in 248 (1)
the Open Economy
26.4 Exercises 249 (1)
26.5 Further Reading 249 (2)
27 Single Country Competitive CGE 251 (10)
27.1 Model Structure 251 (1)
27.2 Model Data 252 (1)
27.3 GAMS Implementation 253 (7)
27.4 Exercises 260 (1)
27.5 Further Reading 260 (1)
28 Concluding Comments 261 (2)
Appendix A Lagrangian Multipliers, Shadow 263 (4)
Prices and Marginal Social Values
A.1 The Lagrangian Multiplier 263 (1)
A.2 Shadow Prices and Marginal Social 264 (3)
Values
Appendix B GAMS Tips and Tricks 267 (16)
B.1 Structuring a Large Program 267 (1)
B.2 Sensitivity Analysis 268 (3)
B.3 Reporting Results 271 (4)
B.3.1 Display 271 (1)
B.3.2 Put 271 (1)
B.3.3 Lists and Tables 272 (1)
B.3.4 Spreadsheets 273 (2)
B.4 Debugging 275 (6)
B.4.1 Compilation Errors 276 (1)
B.4.2 Execution Errors 277 (2)
B.4.3 Infeasibilities 279 (1)
B.4.4 Simulation Errors 280 (1)
B.5 Further Reading 281 (2)
Bibliography 283 (8)
Index 291
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