Operational spatial computable general equilibrium modeling

Abstract.

A prototype spatial computable general equilibrium model is developed and illustrated by a numerical example. The theoretical basis is a complete Arrow-Debreu equilibrium under perfect competition. The leading principle of model design is parsimony: The specification restricts the number of parameters in a way allowing for a model calibration relying on a limited data base, which is readily available in a country with a well developed statistical service. No “data generating” first stage, using entropy maximisation or other methods not in line with the philosophy of microeconomic equilibrium analysis, is required.