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Implicit Additivity as a Strategy for Restricting The Parameter Space in CGE Models

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  • Hertel, Thomas W.
  • Peterson, Everett B.
  • Surry, Yves
  • Preckel, Paul V.
  • Tsigas, Marinos E.

Abstract

The purpose of this paper is to illustrate the value of the Constant Difference Elasticity (CDE) functional form in applied general equilibrium analysis. It is a natural generalization of the commonly used CES form which permits the researcher to calibrate preferences to complete vectors of own-price and income elasticities. Similarly revenue and cost functions may be calibrated to appropriate vectors of compensated own-price elasticities of supply and demand. Because the CDE is an implicit functional form, its incorporation into a CGE model requires some additional steps. These are discussed and a tworegion, three good illustration is provided.

Suggested Citation

  • Hertel, Thomas W. & Peterson, Everett B. & Surry, Yves & Preckel, Paul V. & Tsigas, Marinos E., 1990. "Implicit Additivity as a Strategy for Restricting The Parameter Space in CGE Models," 1990 Annual meeting, August 5-8, Vancouver, Canada 270868, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    • Handle: RePEc:ags:aaea90:270868
    DOI: 10.22004/ag.econ.270868
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    References listed on IDEAS

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    Cited by:

    1. Hertel, Thomas W. & Mark Horridge, J. & Pearson, K. R., 1992. "Mending the family tree a reconciliation of the linearization and levels schools of AGE modelling," Economic Modelling, Elsevier, vol. 9(4), pages 385-407, October.
    2. Paul Preckel & Thomas Hertel & John Cranfield, 2005. "Implicit Additive Preferences: A Further Generalization of the CES," Working Papers 05-03, Purdue University, College of Agriculture, Department of Agricultural Economics.
    3. Rod Tyers & Yongzheng Yang, 1997. "Trade with Asia and skill upgrading: Effects on labor markets in the older industrial countries," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 133(3), pages 383-418, September.
    4. Fogarty, James Joseph & Jakeman, Guy, 2011. "Wine tax reform: The impact of introducing a volumetric excise tax for wine," Working Papers 108667, University of Western Australia, School of Agricultural and Resource Economics.
    5. Yu, Wusheng & Hertel, Thomas W. & Preckel, Paul V. & Eales, James S., 2004. "Projecting world food demand using alternative demand systems," Economic Modelling, Elsevier, vol. 21(1), pages 99-129, January.

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