Figures and tables in Sequential linking of computable general equilibrium and microsimulation models: A comparison of behavioural and reweighting techniques

Abstract

Several approaches have recently been developed to combine a computable general equilibrium model (CGE) and a microsimulation (MS) model. These so-called CGE-MS models enjoy a growing interest because they build a bridge between macro- and microeconomic analyses. This paper focuses on the ‘top-down’ approach. In this context, the CGE model is used to simulate the changes at the macroeconomic level after the policy change, which are then passed on to the MS model. The aim of this paper is to compare the ‘top-down’ approach introduced by Bourguignon et al. (2003) based on a behavioural MS model with an alternative and simpler approach making use of a non-behavioural MS model in combination with a reweighting procedure. Both approaches are presented and applications are provided using South African data. We compare the results obtained with both approaches for a typical simulation of the impact of trade liberalisation on income distribution. The reweighting approach introduces a small bias in the results, however without modifying the main conclusions. This is an indication that, given its relative simplicity compared to the behavioural approach, the reweighting approach can constitute a good alternative when data or time constraints do not allow the use of the behavioural approach and when the interest does not lie in the production of individual-level transition matrices.

This article contains 2 tables.

Tables

Table 1. CGE Simulation Results from the Elimination of Import Tariffs.

	Base values (in billions of rand)	Percentage change from base year
Real GDP	888	0.4
CPI	−	−0.6
Real exchange rate	−	−0.2
Nominal exchange rate	−	0.0
Exports (volume)	249	1.0
Imports (volume)	225	2.0
Trade balance	5% of GDP	−0.2^a
Private savings	R154	1.2
Government deficit	−1.9% of GDP	−0.7^a
Investment (volume)	132	0.0
Factor real returns
Capital	−	1.9
Low-skilled labour	−	0.0
Skilled labour	−	0.0
High-skilled labour	−	0.6
Factor demand (in millions of workers)
Low-skilled labour	3.6	0.6
Skilled labour	2.7	0.7
High-skilled labour	1.1	0.3

Note:

Changes are expressed in percentage points of GDP.

Table 2. Simulation Results from the two alternative specifications of the MS Model (percentage change from base values).

	Base values	Behavioural approach					Reweighting approach
	Base values	All	Blacks	Coloureds	Asians	Whites	All	Blacks	Coloureds	Asians	Whites
Inactive^a	28,032	−0.1	−0.1	−0.1	−0.2	−0.3	−0.1	−0.1	−0.1	−0.1	−0.2
Unemployed^a	3,806	−0.4	−0.4	−0.6	−0.9	−0.9	−0.3	−0.2	−0.6	−0.4	−0.6
Subsistence agriculture^a	736	−0.1	−0.1	−0.1	0.0	−0.1	−0.2	−0.2	−0.6	−0.5	−0.2
Informal workers^a	3,357	−0.2	−0.2	−0.4	−0.1	0.6	−0.4	−0.3	−0.7	−0.7	−0.8
Formal workers^a	7,307	0.6	0.7	0.6	0.5	0.4	0.6	0.7	0.6	0.4	0.4
Real income per capita^b	11,098	0.8	0.8	0.6	0.6	0.8	0.7	0.8	0.7	0.6	0.6
Headcount Index^c	29.0	−1.1	−1.1	−0.8	0.0	0.0	−0.8	−0.8	−1.1	−0.8	−0.6
Poverty Gap Index^c	11.3	−2.0	−1.9	−4.4	−9.9	−13.6	−1.1	−1.1	−1.8	−1.0	−3.3
Gini	0.67	−0.1	−0.2	−0.2	−0.1	0.1	0.0	0.0	−0.1	0.1	0.2

Base values in thousands.

Average real disposable income per capita in Rand per year.

The poverty line is the international $2/day poverty line (R2,088/year/capita in 2000 prices).