Building a CGE Model for Economic and Environmental Policies

Francisco André, Manuel Alejandro Cardenete and Carlos Romero ()
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Carlos Romero: Technical University of Madrid Research Group: Economics for a Sustainable Environment

Chapter Chapter 5 in Designing Public Policies, 2010, pp 79-87 from Springer

Abstract: Abstract To perform a joint analysis of economic and environmental policy (which will be done in the coming chapters), we need to build a model that includes information about both the key economic variables and the environmental impact of economic activity. In this chapter we introduce the standard structure of the CGE model (following the Walrasian tradition) that we use for this task. We present the technological structure, represented by a nested production function. Concerning consumer behaviour, we include a single representative consumer that makes decisions about consumption and saving while trying to maximize his/her utility function subject to a budget constraint. Pollutant emissions are introduced following a short-term approach according to which pollution intensity is assumed to be fixed. We provide for the possibility that the government imposes emissions charges on top of other taxes. The basic structure of the model is completed with a description of input markets, the foreign sector (whose behaviour is assumed to be exogenous) and the closure rule which links investment, saving and the public and foreign balances. We also introduce the main database used for the calibration process, which is Spain’s social accounting matrix.

Keywords: Real Wage; Computable General Equilibrium Model; Social Security Contribution; Representative Consumer; Pollution Intensity (search for similar items in EconPapers)
Date: 2010
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Persistent link: https://EconPapers.repec.org/RePEc:spr:lnechp:978-3-642-12183-8_5

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DOI: 10.1007/978-3-642-12183-8_5

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