Innovative approach of technical change in CGE models: reconciling BU and TD through dual accounting

Ruben Bibas and Julien Lefèvre ()

No 5617, EcoMod2013 from EcoMod

Abstract: Ghersi and Hourcade (2006) proved that the impact of technical constraints (often derived from bottom-up models) may result in strong macroeconomic impacts. Therefore, the modeling choices of the representation of technical change in CGE models affect the evaluation of the cost of climate and energy policies, as well as the assessment of development potentials and green growth. Improving the realism of technical constraints on production and consumption choices thus leads to a better economic assessment of these public policies realism of technical constraints on production and consumption choices thus leads to a better economic assessment of these public policies. Among these endeavors, several methodologies stand out. We distinguish three types of methodologies. First, an effort of integration towards a soft-linked model combines a CGE top-down model with one or several bottom-up models. The alternative is the conception of a hard-linked model, conceived from the beginning as a hybrid between top-down and bottom-up. The second type uses Mixed Complementary Problems (MCP, or related methodologies). Finally, the third type relies on double-accounting Social Accounting Matrices as a link between economic accounting and physical accounting. The aim of this article is to provide a survey of explicit description of the hybridization methodology. We first go briefly over hybridization methodologies, making an inventories of the existing attempts. A second part is dedicated to understanding the linkage variables needed for the various attempts at hybridizing top-down and bottom-up models. The third part links hybridization methodologies and the need for data backing up the modeling, and the existing ways of combining data from different sources. A emphasis is given to the underlying assumptions during this data reconciliation process. Then, we discuss the possible representations of technical change in those frameworks, focusing on understanding the mode of description of discrete technologies specifications and limitations in CGEs, the representation of energy efficiency of those technologies and the dialogue between macroeconomic evolution and technical change. Finally, we do an assessment of hybrid CGE model qualities on three criteria: flexibility of representations (microeconomic behavior, functional forms), model control (economy-matter interface and energy efficiency) and dialogue enhancers (variables to foster interdisciplinary dialogue). See above See above

Keywords: NA; General equilibrium modeling (CGE); Modeling: new developments (search for similar items in EconPapers)
Date: 2013-06-21
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Persistent link: https://EconPapers.repec.org/RePEc:ekd:004912:5617

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