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A Micro-Macro Model for South Africa: Building and Linking a Microsimulation Model to a CGE Model

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  • Nicolas Hérault

    (Centre d'Économie du Développement (IFReDE-GRES) Université Montesquieu Bordeaux IV and Melbourne Institute of Applied Economic and Social Research, The University of Melbourne)

Abstract

This paper describes a newly-built micro-macro model for South Africa. A computable general equilibrium (CGE) model and a microsimulation (MS) model are combined in a sequential approach in order to build an effective tool to assess the effects of various macroeconomic policies and shocks on South African households. The CGE model is used to simulate the macro-changes in the structure of the economy after the policy change or the macro-shock. In a second step, these changes are passed on to the MS model. Micro-macro consistency equations, along with the direct transmission of prices, ensure that macro-changes are fully transmitted from the CGE to the MS model. Given any change in the macroeconomic structure of the economy predicted by the CGE model, the MS model predicts how individual agents modify their behaviours and how their incomes are affected, while accounting for individual heterogeneity.

Suggested Citation

  • Nicolas Hérault, 2005. "A Micro-Macro Model for South Africa: Building and Linking a Microsimulation Model to a CGE Model," Melbourne Institute Working Paper Series wp2005n16, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
    • Handle: RePEc:iae:iaewps:wp2005n16
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    File URL: http://melbourneinstitute.unimelb.edu.au/downloads/working_paper_series/wp2005n16.pdf
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    References listed on IDEAS

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    Cited by:

    1. Andreas PEICHL, 2008. "The Benefits of Linking CGE and Microsimulation Models - Evidence from a Flat Tax analysis," EcoMod2008 23800106, EcoMod.
    2. Giulia COLOMBO, 2008. "The Effects of DR-CAFTA in Nicaragua: A CGE-Microsimulation Model for Poverty and Inequality Analysis," EcoMod2008 23800025, EcoMod.
    3. Kamel Louhichi & Hugo Valin, 2012. "Impact of EU biofuel policies on the French arable sector: A micro-level analysis using global market and farm-based supply models," Review of Agricultural and Environmental Studies - Revue d'Etudes en Agriculture et Environnement, INRA Department of Economics, vol. 93(3), pages 233-272.
    4. Ahmed, Vaqar & O' Donoghue, Cathal, 2007. "CGE-Microsimulation Modelling: A Survey," MPRA Paper 9307, University Library of Munich, Germany.
    5. Gemma Wright & Michael Noble & Helen Barnes & David McLennan & Michell Mpike, 2016. "SAMOD, a South African tax-benefit microsimulation model: Recent developments," WIDER Working Paper Series 115, World Institute for Development Economic Research (UNU-WIDER).
    6. Nicolas Hérault, 2005. "Trade Liberalisation, Poverty and Inequality in South Africa: A CGE-Microsimulation Analysis," Melbourne Institute Working Paper Series wp2005n17, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
    7. Eveline S. Van Leeuwen, 2010. "The effects of future retail developments on the local economy: Combining micro and macro approaches," Papers in Regional Science, Wiley Blackwell, vol. 89(4), pages 691-710, November.
    8. Colombo, Giulia, 2008. "Linking CGE and Microsimulation Models: A Comparison of Different Approaches," ZEW Discussion Papers 08-054, ZEW - Leibniz Centre for European Economic Research.

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