Abstract
This is a technical chapter intended for readers interested in modeling issues, where the authors describe the structure of the CEER model, a fully operational ICGE model for Colombia. The model uses an approach similar to Peter et al. (The theoretical structure of MONASH-MRF. Monash University, Clayton, 1996), Haddad (Regional inequality and structural changes: Lessons from the Brazilian experience. Ashgate, 1999), and Haddad & Hewings (The Quarterly Review of Economics and Finance 45(2–3): 476–496, 2005) to incorporate the interregional economic structure. It uses the absorption matrix as the basis to calibrate the structural coefficient of the ICGE model, together with a set of elasticities either properly estimated or borrowed from the econometric literature applied for Colombia. This database captures economy-wide effects through an intricate plot of input-output relations. The current version of the CEER model identifies the economies of the 32 Colombian Departments and the capital city, Bogotá D.C Results are based on a bottom-up approach – i.e., national results are obtained from aggregating regional results.
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Notes
- 1.
Friedman called this strategy a solution for the problem of form, not of content: of displaying an idealized picture of the economic system, not of constructing an engine for analyzing concrete problems (Friedman, 1955, p. 904).
- 2.
“An empirical economic model (…) embodies three types of information: analytical, functional and numerical. The analytical structure is the background theoretical material which identifies the variables of interest and posits their causal relations. The functional structure is the mathematical representation of the analytical material and consists of the algebraic equations which make up the actual model. The numerical structure consists of the signs and magnitudes of the coefficients in the equations which form the functional structure” (McKitrick, 1998, p. 545).
- 3.
Spencer (1988) points out that this assumption is extraordinarily convenient for (interregional) CGE work, since it admits the presence of cross hauling in a standard neoclassical model and reduces concern about small changes having big effects on the pattern of trade and production (ruling out specialization in consumption).
- 4.
- 5.
A CGE model is simply the formalization of this general representation, along with the equilibrium constraints defined by the Walrasian paradigm. CGE models differ in how they define their analytical, functional and numerical structures.
- 6.
We have specified a seventh residual user, (7), to deal with statistical discrepancies in the balancing of the model’s absorption matrix based on the Colombian interregional input–output system (IIOS).
- 7.
In a long run closure, the assumptions on interregional mobility of capital and labor are relaxed by swapping variables \(x_{{\left( {g + 1,2} \right)}}^{{\left( {1j} \right)r}}\), \({\text{natrealwage}}\), \({\text{wage}}\_{\text{diff}}^{\left( r \right)}\) and \(d\_{\text{rm}}^{\left( r \right)}\), for \(f_{\left( k \right)}^{{\left( {1j} \right)r}}\), \({\text{del}}\_{\text{unr}}^{\left( r \right)}\) and \({\text{util}}\_{\text{diff}}^{\left( r \right)}\).
- 8.
POSAR is the import and export classification system used in the DIMPE at a basic 10-digit level. It is used to identify products/commodities.
- 9.
Expenditure elasticities used in the calibration: food (0.786), health (0.973), clothing (1.025), housing (1.043), personal services and other goods (1.131), transportation (1.115), culture and education (1.186).
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Haddad, E.A., Araújo, I.F. (2023). The Interregional Computable General Equilibrium Model for Colombia. In: Haddad, E.A., Bonet, J., Hewings, G.J.D. (eds) The Colombian Economy and Its Regional Structural Challenges. Advances in Spatial Science. Springer, Cham. https://doi.org/10.1007/978-3-031-22653-3_6
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