Economics and Information Theory

統計年鑑 = Statistical yearbook

Computable general equilibrium (CGE) models are used widely in policy analysis. The purpose of this paper is to contribute to and facilitate the use of CGE models. The paper includes a detailed presentation of a “standard” CGE model (an equation-by-equation description) and its required database. It incorporates features developed in recent years in research projects conducted at IFPRI. These features, which are of particular importance in developing countries, include household consumption of non-marketed (or “home”) commodities, explicit treatment of transaction costs for commodities that enter the market sphere, and a separation between producing activities and commodities that permits any activity to produce multiple commodities and any commodity to be produced by multiple activities. The paper discusses the implementation of the model in GAMS (the General Algebraic Modeling System) and is accompanied by a self-extracting zip file, which includes the GAMS files for the model, sample databases, simulations, solution reports, and a SAM aggregation program. Although the paper provides a standardized framework for analysis, the analyst is not forced to make “one-size-fits-all” assumptions. The GAMS code is written in a manner that gives the analyst considerable flexibility in model specification.

/pdf/a-standard-computable-general-equilibrium-cge-model-in-gams-4vs2kulk88.pdf

A standard computable general equilibrium (CGE) model in GAMS

The problem in estimating a social accounting matrix (SAM) for a recent year is to find an efficient and cost-effective way to incorporate and reconcile information from a variety of sources, including data from prior years. Based on information theory, the paper presents a flexible 'cross entropy' (CE) approach to estimating a consistent SAM starting from inconsistent data estimated with error, a common experience in many countries. The method represents an efficient information processing rule-using only and all information available. It allows incorporating errors in variables, inequality constraints, and prior knowledge about any part of the SAM. An example is presented, applying the CE approach to data from Mozambique, using a Monte Carlo approach to compare the CE approach to the standard RAS method and to evaluate the gains in precision from utilizing additional information.

/pdf/updating-and-estimating-a-social-accounting-matrix-using-4xxgclo14k.pdf

Updating and Estimating a Social Accounting Matrix Using Cross Entropy Methods

All countries fund safety net programs for the protection of their people Though an increasing number of safety net programs are extremely well thought out, adroitly implemented, and demonstrably effective, many others are not This book aims to assist those concerned with social policy to understand why countries need social assistance, what kind of safety programs will serve those best and how to develop such programs for maximum effectiveness Safety nets are part of a broader poverty reduction strategy interacting with and working alongside of social insurance; health, education, and financial services; the provision of utilities and roads; and other policies aimed at reducing poverty and managing risk Though useful, safety nets are not a panacea, and there are real concerns over whether they are affordable and administratively feasible or desirable in light of the various negative incentives they might create In most settings where there is political will to do so, such concerns can be managed through a number of prudent design and implementation features Much information and innovation exist on these topics; this book summarizes, references, and builds on this knowledge base to promote well-crafted safety nets and safety net policy

/pdf/for-protection-and-promotion-the-design-and-implementation-3ckufds40q.pdf

For Protection and Promotion: The Design and Implementation of Effective Safety Nets

There is a continuing need to use recent and consistent multisectoral economic data to support policy analysis and the development of economywide models. Updating and estimating input-output tables and social accounting matrices (SAMs), which provides the underlying data framework for this type of model and analysis, for a recent year is a difficult and a challenging problem. The traditional RAS approach requires that we start with a consistent SAM for a particular year and “update” it for a later year given new information on row and column sums. This paper extends the RAS method by proposing a flexible “cross entropy” approach to estimating a consistent SAM starting from inconsistent data estimated with error, a common experience in many countries. The method is flexible and powerful when dealing with scattered and inconsistent data. It allows incorporating errors in variables, inequality constraints, and prior knowledge about any part of the SAM (not just row and column sums). Since the input-output accounts are contained within the SAM framework, updating an input-output table is a special case of the general SAM estimation problem. The paper describes the RAS procedure and “cross entropy” method, and compares the underlying “information theory” and classical statistical approaches to parameter estimation. An example is presented applying the cross entropy approach to data from Mozambique. An appendix includes a listing of the computer code in the GAMS language used in the procedure.

Estimating a social accounting matrix using cross entropy methods

This paper documents the computer code implementing the CE-SAM estimation technique in GAMS (General Algebraic Modeling System). It defines the estimation problem in a deterministic setting; extends the approach to include a stochastic treatment of errors in control totals; summarizes the equations describing CE technique for estimating a consistent SAM starting from an inconsistent data set estimated with error; and provides the GAMS code.

Gams code for estimating a social accounting matrix (sam) using cross entropy (ce) methods

This paper uses a Computable General Equilibrium (CGE) model to simulate the short-run effects of alternative food- subsidy scenarios. Savings from reduced subsidy spending are used to reduce direct taxes uniformly for all household types. The model uses a 1996/97 database with detailed household information. The simulated impact of targeting or eliminating oil and sugar subsidies is small: disaggregated real household consumption changes by ±0.3 percent. It is progressive if the subsidy is targeted to "the needy" (the bottom two quintiles in rural and urban areas) and regressive if it is eliminated. The targeting of all food subsidies is pro-needy, in part due to important indirect effects. It raises the consumption of the needy by 0.5 percent with, on average, little change for the nonneedy. The strongest gains are recorded for the rural needy (consumption increase by 1.0 percent). Food subsidy elimination is regressive: the needy suffer a consumption loss of 1.1 percent. If the government savings instead are transferred to the needy, the impact is reversed: consumption increases by 4.2 percent for needy households while the nonneedy register a small loss. The overall policy implication of the paper is that there is scope for reducing food subsidy spending without hurting the low-income groups.

A general equilibrium analysis of alternative scenarios for food subsidy reform in Egypt

In this study, a dynamically recursive general equilibrium model of Morocco is used to examine alternative trade and domestic policy scenarios involving the implementation of the EU Association Agreement for the period 1998-2012. The model has a detailed treatment of the agricultural and rural economy in Morocco. The results for the trade liberalization scenarios indicate that tariff unification has small aggregate effects whereas the removal of non-tariff barriers has strong positive aggregate effects: factor incomes and household welfare expand considerably more rapidly than for the base. However, trade liberalization disfavors the rural poor, especially in rainfed areas. We simulate the introduction of complementary domestic policies with a non-distorting transfer program that fully compensates the owners of rainfed resources and skill upgrading for the rural labor force. The results indicate that, if combined with at least one of these complementary domestic policies, trade liberalization can lead to a win-win outcome: the welfare of all household groups increases significantly more rapidly than if status-quo policies are followed.

Moataz El-Said

Papers

Updating and Estimating a Social Accounting Matrix Using Cross Entropy Methods

Estimating a social accounting matrix using cross entropy methods

Gams code for estimating a social accounting matrix (sam) using cross entropy (ce) methods

A general equilibrium analysis of alternative scenarios for food subsidy reform in Egypt

Trade liberalization and complementary domestic policies: a rural-urban general equilibrium analysis of Morocco