In this paper I employ a dynamic general equilibrium model to study macroeconomic effects and welfare implications of health policies for universal coverage in the U.S. The model is calibrated to the U.S. data. Numerical simulations indicate that adopting universal coverage has several important macroeconomic effects on health expenditures, hours worked, and increases welfare by improving aggregate health status, and removing adverse selection.
{"title":"Macroeconomic Analysis of Universal Coverage in the U.S.","authors":"Zhigang Feng","doi":"10.2139/ssrn.2037076","DOIUrl":"https://doi.org/10.2139/ssrn.2037076","url":null,"abstract":"In this paper I employ a dynamic general equilibrium model to study macroeconomic effects and welfare implications of health policies for universal coverage in the U.S. The model is calibrated to the U.S. data. Numerical simulations indicate that adopting universal coverage has several important macroeconomic effects on health expenditures, hours worked, and increases welfare by improving aggregate health status, and removing adverse selection.","PeriodicalId":346619,"journal":{"name":"ERN: Computable General Equilibrium Models (Topic)","volume":"86 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2012-04-09","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"133176896","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We investigate the role played by the anchoring-and-adjustment heuristic in the speculative bubbles dynamics. In order to link anchoring bias and price deviations from fundamental value, we develop a stock market equilibrium model with heterogeneous investors: fundamental investor anchoring to past stock market prices and noise traders. The equilibrium model we derive suggests that price is a function of fundamental value, past price, noise and anchoring level. Based on our model, we run a set of Monte Carlo experiments with various anchoring levels: no anchoring, low anchoring and high anchoring. We bring the evidence that large speculative bubbles can only occur when fundamental traders highly anchor to stock market prices. Noise cannot in itself cause such phenomenon. Our findings also suggest that a high anchoring level is consistent with slowly mean reverting bubbles lasting many years.
{"title":"Speculative Bubbles Dynamics and the Role of Anchoring","authors":"Benjamin Williams","doi":"10.2139/ssrn.2012455","DOIUrl":"https://doi.org/10.2139/ssrn.2012455","url":null,"abstract":"We investigate the role played by the anchoring-and-adjustment heuristic in the speculative bubbles dynamics. In order to link anchoring bias and price deviations from fundamental value, we develop a stock market equilibrium model with heterogeneous investors: fundamental investor anchoring to past stock market prices and noise traders. The equilibrium model we derive suggests that price is a function of fundamental value, past price, noise and anchoring level. Based on our model, we run a set of Monte Carlo experiments with various anchoring levels: no anchoring, low anchoring and high anchoring. We bring the evidence that large speculative bubbles can only occur when fundamental traders highly anchor to stock market prices. Noise cannot in itself cause such phenomenon. Our findings also suggest that a high anchoring level is consistent with slowly mean reverting bubbles lasting many years.","PeriodicalId":346619,"journal":{"name":"ERN: Computable General Equilibrium Models (Topic)","volume":"10 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2011-10-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"122360353","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
A rich but tractable variant of the Burdett-Mortensen model of wage setting behavior is formulated and a dynamic market equilibrium solution to the model is defined and characterized. In the model, firms cannot commit to wage contracts. Instead, the Markov perfect equilibrium to the wage setting game, characterized by Coles (2001), is assumed. In addition, firm recruiting decisions, firm entry and exit, and transitory firm productivity shocks are incorporated into the model. Given that the cost of recruiting workers is proportional to firm employment, we establish the existence of an equilibrium solution to the model in which wages are not contingent on firm size but more productive employers always pay higher wages. Although the state space, the distribution of workers over firms, is large in the general case, it reduces to a scalar that can be interpreted as the unemployment rate in the special case of homogenous firms. Furthermore, the equilibrium is unique. As the dimension of the state space is equal to the number of firms types in general, an (approximate) equilibrium is computable.
{"title":"Equilibrium Wage and Employment Dynamics in a Model of Wage Posting Without Commitment","authors":"M. Coles, D. Mortensen","doi":"10.3386/w17284","DOIUrl":"https://doi.org/10.3386/w17284","url":null,"abstract":"A rich but tractable variant of the Burdett-Mortensen model of wage setting behavior is formulated and a dynamic market equilibrium solution to the model is defined and characterized. In the model, firms cannot commit to wage contracts. Instead, the Markov perfect equilibrium to the wage setting game, characterized by Coles (2001), is assumed. In addition, firm recruiting decisions, firm entry and exit, and transitory firm productivity shocks are incorporated into the model. Given that the cost of recruiting workers is proportional to firm employment, we establish the existence of an equilibrium solution to the model in which wages are not contingent on firm size but more productive employers always pay higher wages. Although the state space, the distribution of workers over firms, is large in the general case, it reduces to a scalar that can be interpreted as the unemployment rate in the special case of homogenous firms. Furthermore, the equilibrium is unique. As the dimension of the state space is equal to the number of firms types in general, an (approximate) equilibrium is computable.","PeriodicalId":346619,"journal":{"name":"ERN: Computable General Equilibrium Models (Topic)","volume":"64 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2011-08-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"117171713","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
It can be theoretically shown that variety trade can be a possible source of increased skill premium in wages. No past studies, however, have empirically quantified how much of the increase in skill premium can be accounted for by the increase in variety trade. This paper now formulates a static general equilibrium model and then calibrates it to the Mexican input-output matrix for 1987. In the calibrated model, our numerical experiments show that the increase in U.S.-Mexican variety trade can explain approximately 12 percent of the actual increase in skill premium in Mexico from 1987 to 2000.
{"title":"Variety Trade and Skill Premium in a Calibrated General Equilibrium Model: The Case of Mexico","authors":"Manoj Atolia, Yoshinori Kurokawa","doi":"10.2139/ssrn.1302937","DOIUrl":"https://doi.org/10.2139/ssrn.1302937","url":null,"abstract":"It can be theoretically shown that variety trade can be a possible source of increased skill premium in wages. No past studies, however, have empirically quantified how much of the increase in skill premium can be accounted for by the increase in variety trade. This paper now formulates a static general equilibrium model and then calibrates it to the Mexican input-output matrix for 1987. In the calibrated model, our numerical experiments show that the increase in U.S.-Mexican variety trade can explain approximately 12 percent of the actual increase in skill premium in Mexico from 1987 to 2000.","PeriodicalId":346619,"journal":{"name":"ERN: Computable General Equilibrium Models (Topic)","volume":"4 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2009-08-29","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"115584313","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
A new methodology for calibrating parameters when working with intractable, dynamic structural models is developed. A straight-forward extension also allows for formal estimation and hypothesis testing in a Generalized Method of Moment framework. The method is based on multigrid techniques used in many state of the art solvers from engineering applications. These techniques are adapted to solve Bellman and Euler-type equations and to handle subtleties arising from the interaction of statistical and numerical errors. The method works on a joint mode of analysis incorporating both statistical and numerical errors in the spirit of "forward-backward" error analysis of Kubler and Schmedders (2005). Numerical results from example problems - and experience from thirty years of multigrid literature - support the papers main finding: a fully-identified model that is smooth in parameters can be calibrated and solved with only about three to five times the work required to solve the model and compute associated "moments" for a single set of parameters. As with other multigrid methods, the solvers can be efficiently and naturally implemented on parallel processors. This work also shows that the size of numerical error can be less important than the qualitative type of error when parameters are fitted to a numerically solved model subject to discretization error. An example is presented in which a popular, consistent discretization of a portfolio problem with endogenous retirement produces an ill-posed, unstable calibration problem. This example and subsequent analysis show greater care must be taken when discretizing a model for a calibration or estimation problem: To avoid corrupting sensitivity analysis, identification, and inference, it is important to perform a joint error analysis that includes both discretization and statistical errors.
{"title":"Fast Multigrid Solvers for Calibration and Estimation of Dynamic Structural Models","authors":"Adam Speight","doi":"10.2139/ssrn.1347506","DOIUrl":"https://doi.org/10.2139/ssrn.1347506","url":null,"abstract":"A new methodology for calibrating parameters when working with intractable, dynamic structural models is developed. A straight-forward extension also allows for formal estimation and hypothesis testing in a Generalized Method of Moment framework. The method is based on multigrid techniques used in many state of the art solvers from engineering applications. These techniques are adapted to solve Bellman and Euler-type equations and to handle subtleties arising from the interaction of statistical and numerical errors. The method works on a joint mode of analysis incorporating both statistical and numerical errors in the spirit of \"forward-backward\" error analysis of Kubler and Schmedders (2005). Numerical results from example problems - and experience from thirty years of multigrid literature - support the papers main finding: a fully-identified model that is smooth in parameters can be calibrated and solved with only about three to five times the work required to solve the model and compute associated \"moments\" for a single set of parameters. As with other multigrid methods, the solvers can be efficiently and naturally implemented on parallel processors. This work also shows that the size of numerical error can be less important than the qualitative type of error when parameters are fitted to a numerically solved model subject to discretization error. An example is presented in which a popular, consistent discretization of a portfolio problem with endogenous retirement produces an ill-posed, unstable calibration problem. This example and subsequent analysis show greater care must be taken when discretizing a model for a calibration or estimation problem: To avoid corrupting sensitivity analysis, identification, and inference, it is important to perform a joint error analysis that includes both discretization and statistical errors.","PeriodicalId":346619,"journal":{"name":"ERN: Computable General Equilibrium Models (Topic)","volume":"11 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2009-03-18","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"127883289","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
In this paper we study the existence problem of a zero point of a function defined on a finite set of elements of the integer lattice Zn of the n-dimensional Euclidean space IRn. It is assumed that the set is integrally convex, which implies that the convex hull of the set can be subdivided in simplices such that every vertex is an element of Zn and each simplex of the triangulation lies in an n-dimensional cube of size one. With respect to this triangu- lation we assume that the function satisfies some property that replaces continuity. Under this property and some boundary condition the function has a zero point. To prove this we use a simplicial algorithm that terminates with a zero point within a finite number of iterations. The standard technique of applying a fixed point theorem to a piecewise linear approximation cannot be applied, because the `continuity property' is too weak to assure that a zero point of the piecewise linear approximation induces a zero point of the function itself. We apply the main existence result to prove the existence of a pure Cournot-Nash equilibrium in a Cournot oligopoly model. We further adapt the main result to a discrete variant of the well-known Borsuk-Ulam theorem and to a theorem for the existence of a solution for the discrete nonlinear complementarity problem.
{"title":"Solving Discrete Systems of Nonlinear Equations","authors":"G. Laan, Dolf Talman, Zaifu Yang","doi":"10.2139/ssrn.1319270","DOIUrl":"https://doi.org/10.2139/ssrn.1319270","url":null,"abstract":"In this paper we study the existence problem of a zero point of a function defined on a finite set of elements of the integer lattice Zn of the n-dimensional Euclidean space IRn. It is assumed that the set is integrally convex, which implies that the convex hull of the set can be subdivided in simplices such that every vertex is an element of Zn and each simplex of the triangulation lies in an n-dimensional cube of size one. With respect to this triangu- lation we assume that the function satisfies some property that replaces continuity. Under this property and some boundary condition the function has a zero point. To prove this we use a simplicial algorithm that terminates with a zero point within a finite number of iterations. The standard technique of applying a fixed point theorem to a piecewise linear approximation cannot be applied, because the `continuity property' is too weak to assure that a zero point of the piecewise linear approximation induces a zero point of the function itself. We apply the main existence result to prove the existence of a pure Cournot-Nash equilibrium in a Cournot oligopoly model. We further adapt the main result to a discrete variant of the well-known Borsuk-Ulam theorem and to a theorem for the existence of a solution for the discrete nonlinear complementarity problem.","PeriodicalId":346619,"journal":{"name":"ERN: Computable General Equilibrium Models (Topic)","volume":"46 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2008-12-18","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"133771918","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Canzoneri and Diba (2004) show that the Taylor principle is not a panacea for equilibrium determinacy in a model where bonds and money provide liquidity services to households. We consider a cashless New Keynesian model with two types of government bonds. One bond provides transaction services, whereas the other is used only as a store of value. We show that the Taylor principle is still sacrosanct, and that the results of Leeper (1991) are confirmed.
{"title":"Determinacy of Interest Rate Rules with Bond Transaction Services in a Cashless Economy","authors":"Massimiliano Marzo, P. Zagaglia","doi":"10.2139/ssrn.1300353","DOIUrl":"https://doi.org/10.2139/ssrn.1300353","url":null,"abstract":"Canzoneri and Diba (2004) show that the Taylor principle is not a panacea for equilibrium determinacy in a model where bonds and money provide liquidity services to households. We consider a cashless New Keynesian model with two types of government bonds. One bond provides transaction services, whereas the other is used only as a store of value. We show that the Taylor principle is still sacrosanct, and that the results of Leeper (1991) are confirmed.","PeriodicalId":346619,"journal":{"name":"ERN: Computable General Equilibrium Models (Topic)","volume":"164 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2008-10-21","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"121701137","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Farmer and Wendner (2004) consider the sensitivity of policy effects, as implied by dynamic multi-sector computable general equilibrium models, with respect to the specification of capital and investment aggregation. They demonstrate that (small) differences in the specification of capital and investment aggregation may yield large differences in the policy effects predicted by dynamic multi-sector computable general equilibrium models. Assmann and Hogrefe, AH in the following, conclude that Farmer and Wendner's (FW) result indeed also holds in different model frameworks. However, they criticize FW's model that is based on the ``puzzling'' value capital approach. Here, FW reply to AH's critique.
{"title":"Dynamic Multi-Sector CGE Modeling: Reply to Assmann and Hogrefe","authors":"R. Wendner, Karl Farmer","doi":"10.2139/ssrn.1156952","DOIUrl":"https://doi.org/10.2139/ssrn.1156952","url":null,"abstract":"Farmer and Wendner (2004) consider the sensitivity of policy effects, as implied by dynamic multi-sector computable general equilibrium models, with respect to the specification of capital and investment aggregation. They demonstrate that (small) differences in the specification of capital and investment aggregation may yield large differences in the policy effects predicted by dynamic multi-sector computable general equilibrium models. Assmann and Hogrefe, AH in the following, conclude that Farmer and Wendner's (FW) result indeed also holds in different model frameworks. However, they criticize FW's model that is based on the ``puzzling'' value capital approach. Here, FW reply to AH's critique.","PeriodicalId":346619,"journal":{"name":"ERN: Computable General Equilibrium Models (Topic)","volume":"24 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2008-07-07","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"123800122","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This paper develops a model of foreign direct investment (FDI) in a computable general equilibrium (CGE) framework by distinguishing between the activities of domestic and foreign-owned firms in both production and demand. Using a variant of the Armington assumption, the model is implemented by merging conventional production, demand and trade data with information on FDI. In a preliminary application, the model is used to analyze the Asia-Pacific Economic Cooperation goal of “free trade and investment in the region” by 2020. The model demonstrates that FDI matters; even in scenarios that do not liberalize FDI flows directly, FDI reinforces liberalization by making production more flexible. Trade and investment liberalization are generally complementary, in the sense that each strengthens the other linkage. Because FDI offers access to foreign technology and variety even in non-traded sectors, its economic effects are particularly pronounced in services.
{"title":"Foreign Direct Investment in a Computable General Equilibrium Framework","authors":"P. Petri","doi":"10.2139/ssrn.1549616","DOIUrl":"https://doi.org/10.2139/ssrn.1549616","url":null,"abstract":"This paper develops a model of foreign direct investment (FDI) in a computable general equilibrium (CGE) framework by distinguishing between the activities of domestic and foreign-owned firms in both production and demand. Using a variant of the Armington assumption, the model is implemented by merging conventional production, demand and trade data with information on FDI. In a preliminary application, the model is used to analyze the Asia-Pacific Economic Cooperation goal of “free trade and investment in the region” by 2020. The model demonstrates that FDI matters; even in scenarios that do not liberalize FDI flows directly, FDI reinforces liberalization by making production more flexible. Trade and investment liberalization are generally complementary, in the sense that each strengthens the other linkage. Because FDI offers access to foreign technology and variety even in non-traded sectors, its economic effects are particularly pronounced in services.","PeriodicalId":346619,"journal":{"name":"ERN: Computable General Equilibrium Models (Topic)","volume":"124 2 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"1997-03-14","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"129164840","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 1900-01-01DOI: 10.1080/09535319100000015
N. Karunaratne
The more robust computable general equilibrium (CGE) modelling has been applied to examine the macroeconomic implications of promoting the nascent Australian information economy.The Australian Information Economy could be trichotimized into marketed or primary information, secondary or non-marketed information and non-marketed information sectors using a special algorithm. The trichotimized database has been used in a CGE framework to examine the macro-policy implications of the emergent information economy. In particular, the nuturing of the primary information sector as a strategic sector under protection yields lack lustre results. Overall, it is the conclusion of this paper that CGE analysis provides richer policy insights to identify the information sectors that could be groomed to reap the benefits of trade. The CGE analytics are more informative that input-output comparative statics.
{"title":"A General Equilibrium Analysis of the Australian Information Economy","authors":"N. Karunaratne","doi":"10.1080/09535319100000015","DOIUrl":"https://doi.org/10.1080/09535319100000015","url":null,"abstract":"The more robust computable general equilibrium (CGE) modelling has been applied to examine the macroeconomic implications of promoting the nascent Australian information economy.The Australian Information Economy could be trichotimized into marketed or primary information, secondary or non-marketed information and non-marketed information sectors using a special algorithm. The trichotimized database has been used in a CGE framework to examine the macro-policy implications of the emergent information economy. In particular, the nuturing of the primary information sector as a strategic sector under protection yields lack lustre results. Overall, it is the conclusion of this paper that CGE analysis provides richer policy insights to identify the information sectors that could be groomed to reap the benefits of trade. The CGE analytics are more informative that input-output comparative statics.","PeriodicalId":346619,"journal":{"name":"ERN: Computable General Equilibrium Models (Topic)","volume":"343 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"1900-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"132305208","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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