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Reducing unwanted consequences of aggregation in large-scale economic models - A systematic empirical evaluation with the GTAP model

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  • Britz, Wolfgang
  • van der Mensbrugghe, Dominique

Abstract

We discuss how to avoid aggregation bias in large-scale global Computable General Equilibrium (CGE) models by reducing the need of pre-model aggregation, based on the combination of algorithmic improvements and a filtering approach which removes small transactions. Using large-scale sensitivity analysis, we show the impact of pre-aggregation and filtering on model size, model solution time and simulated welfare impacts, using a multi-lateral partial trade liberalization simulated with the standard GTAP model as the test case. We conclude that pre-model aggregation should be avoided as far as possible, and that our filtering approach and algorithmic improvements allow global CGE analysis even with highly disaggregated data sets at moderate solution times.

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  • Britz, Wolfgang & van der Mensbrugghe, Dominique, 2016. "Reducing unwanted consequences of aggregation in large-scale economic models - A systematic empirical evaluation with the GTAP model," Economic Modelling, Elsevier, vol. 59(C), pages 463-472.
    • Handle: RePEc:eee:ecmode:v:59:y:2016:i:c:p:463-472
    DOI: 10.1016/j.econmod.2016.07.021
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    7. Himics, Mihály & Britz, Wolfgang, 2016. "Flexible and welfare-consistent tariff aggregation over exporter regions," Economic Modelling, Elsevier, vol. 53(C), pages 375-387.
    8. Brockmeier, Martina & Bektasoglu, Beyhan, 2014. "Model structure or data aggregation level: Which leads to greater bias of results?," Economic Modelling, Elsevier, vol. 38(C), pages 238-245.
    9. Jason H. Grant & Thomas W. Hertel & Thomas F. Rutherford, 2007. "Tariff line analysis of U.S. and international dairy protection," Agricultural Economics, International Association of Agricultural Economists, vol. 37(s1), pages 271-280, December.
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    11. Pelikan, Janine & Brockmeier, Martina, 2008. "Methods to Aggregate Import Tariffs and their Impacts on Modeling Results," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 23, pages 685-708.
    12. Britz, Wolfgang & Pérez-Dominguez, Ignacio & Narayanan, Gopalakrishnan Badri, 2015. "Analyzing Results from Agricultural Large-scale Economic Simulation Models: Recent Progress and the Way Ahead," German Journal of Agricultural Economics, Humboldt-Universitaet zu Berlin, Department for Agricultural Economics, vol. 64(02), June.
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    Cited by:

    1. Britz, Wolfgang & van der Mensbrugghe, Dominique, 2017. "A flexible, modular and extendable framework for CGE analysis in GAMS," Conference papers 332918, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    2. van der Mensbrugghe, Dominique, 2019. "The Standard GTAP Model in GAMS, Version 7.1," GTAP Working Papers 6825, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University.
    3. Argueyrolles, Robin & Delzeit, Ruth, 2022. "The interconnections between Fossil Fuel Subsidy Reforms and biofuels," Conference papers 333492, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    4. Himics, Mihaly & Listorti, Giulia & Tonini, Axel, 2020. "Simulated economic impacts in applied trade modelling: A comparison of tariff aggregation approaches," Economic Modelling, Elsevier, vol. 87(C), pages 344-357.
    5. Haddad, Salwa & Escobar, Neus & Bruckner, Martin & Britz, Wolfgang, 2022. "Promoting extensive cattle production in the European Union has major implications for global agricultural trade and climate change," Discussion Papers 324710, University of Bonn, Institute for Food and Resource Economics.
    6. Britz, Wolfgang & Li, Jingwen & Shang, Linmei, 2021. "Combining large-scale sensitivity analysis in Computable General Equilibrium models with Machine Learning: An Example Application to policy supporting the bio-economy," Conference papers 333285, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    7. Dominique van der Mensbrugghe, 2018. "The Standard GTAP Model in GAMS, Version 7," Journal of Global Economic Analysis, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University, vol. 3(1), pages 1-83, June.
    8. van der Mensbrugghe, Dominique, 2019. "The Standard GTAP Model in GAMS, Version 7.1," GTAP Technical Papers 6825, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University.
    9. He, Xi & Yang, Anton & Balistreri, Edward J. & Zhang, Wendong, 2021. "Agricultural Trade Impacts of RCEP: an Integrated Partial Equilibrium and General Equilibrium Assessment," Conference papers 333312, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    10. Jafari, Yaghoob & Britz, Wolfgang & Guimbard, Houssein & Beckman, Jayson, 2021. "Properly capturing tariff rate quotas for trade policy analysis in computable general equilibrium models," Economic Modelling, Elsevier, vol. 104(C).
    11. Cai, Yongxia & Woollacott, Jared & Beach, Robert H. & Rafelski, Lauren E. & Ramig, Christopher & Shelby, Michael, 2023. "Insights from adding transportation sector detail into an economy-wide model: The case of the ADAGE CGE model," Energy Economics, Elsevier, vol. 123(C).
    12. Yaghoob Jafari & Wolfgang Britz, 2020. "Brexit: an economy-wide impact assessment on trade, immigration, and foreign direct investment," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 47(1), pages 17-52, February.
    13. Rumiana Górska, 2022. "Sectoral effects of the Japan-EU Economic Partnership Agreement for the European Union countries," Asia Europe Journal, Springer, vol. 20(2), pages 99-114, June.
    14. Yaghoob Jafari & Mihaly Himics & Wolfgang Britz & Jayson Beckman, 2021. "It is all in the details: A bilateral approach for modelling trade agreements at the tariff line," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 69(3), pages 415-442, September.
    15. Jafari, Yaghoob & Britz, Wolfgang, 2016. "Prospects of the Food Processing Sector under Tariff and Non-Tariff Measures Liberalization in the Transatlantic Trade and Investment Partnership," Discussion Papers 250254, University of Bonn, Institute for Food and Resource Economics.
    16. Haddad, Salwa & Britz, Wolfgang & Börner, Jan, 2017. "Impacts Of Increased Forest Biomass Demand In The European Bioeconomy," 57th Annual Conference, Weihenstephan, Germany, September 13-15, 2017 261986, German Association of Agricultural Economists (GEWISOLA).
    17. Wolfgang Britz & Hasan Dudu & Ilaria Fusacchia & Yaghoob Jafari & Roberto Roson & Luca Salvatici & Martina Sartori, 2019. "Economy-wide analysis of food waste reductions and related costs," JRC Research Reports JRC113395, Joint Research Centre.

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    More about this item

    Keywords

    Computable general equilibrium analysis; Aggregation bias;

    JEL classification:

    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques

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