Applying Meta modeling for extended CGE-modeling: Sample techniques and potential application

Ding Jin, Johannes Hedtrich and Christian Henning

No 332947, Conference papers from Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project

Abstract: CGE-applications are workhorse models in applied economic policy analysis, i.e. the development economic literature or modeling climate and energy policies. However, beyond its prominent application CGE-model approaches are also heavily criticized. On the one hand, while the general equilibrium model has the advantages in terms of internal consistency and allowing for clearer identification of causality, the application of a CGE model requires simplifying assumptions that are open to challenge. Moreover, empirical results derived from the CGE-model application are very sensitive to specific model specifications, that are often only weakly empirically justified, e.g. assumed closure rules and assumed elasticity parameters. Thus, many results, e.g. growth-poverty linkages, that are derived from a CGE model are in fact plagued by high model uncertainty implying a limited potential to generate robust policy-relevant messages. To overcome theoretical shortcomings of ad hoc CGE-approaches we suggest a combined approach incorporating econometric approaches to assess policy-growth linkages that are integrated into the CGE-approach modeling growth-poverty linkages. However, estimation of integrated econometric and CGE-modeling approaches are often tedious.Finally, CGE-model approaches are often applied to provide scientific expertise to advise the government in political practice. Hence, it would be necessary to incorporate general equilibrium models into overall decision-making models. However, given the size and complexity of CGE-models integration of these approaches into an overall decision-making modeling approach is rather difficult and often numerically not tractable. Therefore, in the context of such a situation, we suggest application of meta-modeling as a potential solution of the application problems of standard CGE-models in advanced policy modeling frameworks and we are motivated to begin with tackling the problem of elasticity parameters and closure rules.

Keywords: Research; Methods/Statistical; Methods (search for similar items in EconPapers)
Date: 2018
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