Economies of Scale and Imperfect Competition in an Applied General Equilibrium Model of the Australian Economy

Kaludura Abayasiri-Silva and Mark Horridge

No 266355, Center of Policy Studies (COPS) Impact Project Papers from Monash University Center of Policy Studies

Abstract: Recently some researchers have suggested that economies of scale and imperfect competition play a major role in determining the effects of exogenous policy shocks. Thus they have emphasised the need to incorporate industrial organisation features into computable general equilibrium (CGE) models. However, our knowledge of this new paradigm is still in its infancy—it is not yet clear how models of this type should be specified and to what extent their predictions are sensitive to the choice of specification. This paper describes a 23-sector CGE model of the Australian economy, based on ORANI and on Horridge (1987a and 1987b), which incorporates economies of scale and imperfect competition. The model is used to investigate whether adding these new features affects simulation results. We present results for three different types of non-competitive regime and compare these with results generated by a traditional (constant returns and perfect competition) version of the same model.

Keywords: Agricultural and Food Policy; Industrial Organization (search for similar items in EconPapers)
Pages: 30
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Persistent link: https://EconPapers.repec.org/RePEc:ags:copspp:266355

DOI: 10.22004/ag.econ.266355

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