Studies in Empirical Economics

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2 Studies in Empirical Economics Aman Ullah (Ed.) Semiparametric and Nonparametric Econometrics VII, 172 pp. Hard cover DM 120, ISBN Walter Kramer (Ed.) Econometrics of Structural Change X, 128 pp. Hard cover DM 85, ISBN Wolfgang Franz (Ed.) Hysteresis Effects in Economic Models VIII, 121 pp. Hard cover DM 90, ISBN

3 John Piggott and John Whalley (Editors) Applied General Equilibrium With 7 Figures Physica-Verlag Heidelberg

4 Editorial Board Wolfgang Franz, University ofkonstanz, FRG Baldev Raj, Wilfrid Laurier University, Waterloo, Canada Andreas Worgotter, Institute for Advanced Studies, Vienna, Austria Editors Professor Dr. John Piggott, School of Economics, University of New South Wales, Sydney, Australia & Research School of Social Sciences, Australian National University, GPO Box 4, Canberra 2601, Australia Professor Dr. John Whalley, Department of Economics, University of Western Ontario, London, Canada N 6A 5 C2 & National Bureau of Economic Research, Cambridge, Mass., USA First published in "Empirical Economics" Vol. 16, No.1, 1991 ISBN ISBN (ebook) DOl / CIP-Titelaufnahme der Deutschen Bibliothek Applied general equilibrium I John Piggott and John Whalley (eds.). - Heidelberg: Physica-Verl., 1991 (Studies in empirical economics) ISBN NE: Piggott, John [Hrsg.] This work is subject to copyright. All rights are reserved, whether the whole or part ofthe material is concerned, specifically the rights of translation, reprinting, reuse of illustration, recitation, broadcasting, reproduction on microfilms or in other ways, and storage in data banks. Duplication of this publication or parts thereofis only permitted under the provisions ofthe German Copyright Law of September 9,1965, in its version of June 24, 1985, and a copyright fee must always be paid. Violations fall under the prosecution act of the German Copyright Law. Physica-Verlag Heidelberg 1991 Softcover reprint of the hardcover 1st edition 1991 The use of registered names, trademarks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use

5 Contents ORANI Projections for the Australian Economy for 1989 to 2020 with Special Reference to the Land Freight Industry P. B. Dixon, M. Horridge and D. T. Johnson Public Good Provision Rules and Income Distribution: Some General Equilibrium Calculations J. Piggott and J. Whalley The Pagan-Shannon Approximation: Unconditional Systematic Sensitivity in Minutes R. M. Wigle A Long Term Model of Oil Markets, Economic Growth and Balance of Payment Constraints A. S. Manne and T. F. Rutherford A General Equilibrium Appraisal of Energy Policy in Mexico T. J. Kehoe and J. Serra-Puche An Empirical Database for a General Equilibrium Model of the European Communities G. W. Harrison, T. F. Rutherford and I. Wooton Three Variants ofthe Whalley Model of Global Trade T. T. Nguyen and R. M. Wigle Industrial Organization Implications of QR Trade Regimes: Evidence and Welfare Costs T. Condon and J. de Melo

6 Preface This collection of papers has its origins in a suggestion by Baldev Raj, one of the permanent editors of Empirical Economics, that a set of papers representing the state of the art in the field of Applied (or Computable) General Equilibrium Analysis would dovetail nicely with the objectives of the journal. We, for our part, were more than happy to take up the suggestion. A small one-day symposium at Western Ontario had been held just prior to Baldev's proposal, and the original idea was in large part to carry these papers as an entire set. The session in question had focused solely on international trade modelling, and the initial thrust for the volume was to concentrate exclusively on this area showing the variety of different approaches now being pursued and the associated policy conclusions. As the volume took shape, however, some of the original papers were committed elsewhere, or turned out to be unsuitable for inclusion for other reasons. Others have been added, and as the editorial and refereeing process took shape the original trade emphasis has been complemented by papers with an energy modelling and methodological focus, producing eight papers in the three groups of methodology, energy, and trade identified in the table of contents. The methodological section spans a range of issues central to the field of applied general equilibrium analysis today. There is the question of the relative attractions of issue specific versus general purpose modelling. The latter is well represented by the paper by Dixon, Horridge, and Johnson who show how an established and widely respected large model (the ORANI model) can be used for industry specific projections for the Australian economy. The former is reflected in the paper by Piggott and Whalley who use a smaller scale model incorporating public goods and based on Australian data to explore public good provision rules with many consumers. The final paper in this section by Wigle takes up the calibration and parameterization issues now at the heart of this field, and explores the behaviour of various approximation techniques for sensitivity analysis. The section on energy modelling contains an example of recent dynamic modelling by Manne and Rutherford, focussed on long term issues surrounding oil markets, economic growth and balance of payments constraints. The paper by Kehoe and Serra Puche uses a more traditional approach to analyse energy policy options in Mexico.

7 2 Preface The third section contains three papers on various trade policy issues and analyses. Harrison, Rutherford, and Wooton present the data base used in other current modelling work of theirs on the European Community, together with its application to a study of the historical accession of the United Kingdom to the European Community. Nguyen and Wigle present three alternative variants of an earlier global trade model due to Whalley, while Condon and de Melo explore the industrial organization implications of quota regimes. While there are many other areas now active in the applied general equilibrium analysis (tax policy, regional analysis, development policy, and environmental policy for example), we feel that this group of papers provides the reader with a good overview of recent activity in this field. John Piggott (University of New South Wales & Australian National University) John Whalley (University of Western Ontario)