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RHOMOLO-v2 Model Description: A spatial computable general equilibrium model for EU regions and sectors

Jean Mercenier (), Maria Teresa Alvarez Martinez (), Andries Brandsma (), Francesco Di Comite, Olga Diukanova (), d'Artis Kancs, Patrizio Lecca (), Montserrat López-Cobo, Philippe Monfort (), Damiaan Persyn, Alexandra Rillaers (), Mark Thissen () and Wouter Torfs ()
Additional contact information
Jean Mercenier: European Commission - JRC,
Andries Brandsma: European Commission - JRC,
Olga Diukanova: European Commission - JRC,
Philippe Monfort: European Commission - DG REGIO
Alexandra Rillaers: European Commission - DG REGIO

No JRC100011, JRC Research Reports from Joint Research Centre (Seville site)

Abstract: This report presents the current version of the European Commission's spatial computable general equilibrium model RHOMOLO, developed by the Directorate-General Joint Research Centre (DG JRC) in collaboration with the Directorate-General for Regional and Urban Policy (DG REGIO) to undertake the ex-ante impact assessment of EU policies and structural reforms. The RHOMOLO model has been used with DG REGIO for the impact assessment of Cohesion Policy, and with the European Investment Bank for impact assessment of EU investment support policies. The structure of the model departs from standard computable general equilibrium models in several dimensions. First, it generalises the modelling of market interactions by introducing imperfect competition in products and labour markets. Second, it exploits the advantages of a full asymmetric bilateral trade cost matrix for all EU regions to capture a rich set of spatial market interactions and regional features. Third, it acknowledges the importance of space also for non-market interactions through an inter-regional knowledge spill-over mechanism originating from research and development activities within a country. This report describes the theoretical foundation of RHOMOLO-v2 (v2 = version 2), its mathematical structure, dynamics, data sources and calibration to allow the reader to approach the model and its outputs with a higher degree of awareness of its strength and limitations. Indeed, as for any general equilibrium model with a reasonable level of complexity, in RHOMOLO it is often challenging to track the mechanisms at work after a policy shock and clearly disentangle causes and effects because of the high number of channels of adjustment and the presence of many feedback effects. The purpose of this documentation is thus to provide a compass to the reader to sail safely through its many equations, assumptions and connections.

Keywords: Spatial computable general equilibrium; economic modelling; spatial anamysis; policy impact assessment; economic geography; regional economics. (search for similar items in EconPapers)
JEL-codes: C68 D58 F12 R13 R30 (search for similar items in EconPapers)
Pages: 80 pages
Date: 2016-12
New Economics Papers: this item is included in nep-cmp and nep-eur
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