Figures and tables in Linking a microsimulation model to a dynamic CGE model: Climate change mitigation policies and income distribution in Australia

Abstract

This paper extends the ‘top-down’ framework developed by Robilliard et al. (2001) to link a computable general equilibrium (CGE) model to a microsimulation (MS) model. The proposed approach allows for the linking of an MS model to a dynamic (rather than static) CGE model. The approach relies on altering the sample weights in order to reproduce long-term population projections and changes in employment as estimated by the CGE model. The approach is applied to assess the effects of climate-change mitigation policies in Australia from 2005 to 2030 at five-yearly intervals.

This article contains 5 figures and 5 tables.

Figures

**Figure 1.** Average real net income per adult equivalent by income quintile: percentage deviations from the reference case.

**Figure 2.** Average real net income per adult equivalent by quintile in the reference case (in financial year 2005/2006 dollars).

**Figure 3.** Average real net income per adult equivalent by household type: deviations from the reference case.

**Figure 4.** Gini coefficient within income quintiles: deviations from the reference case.

**Figure 5.** Gini coefficient by household type: deviations from the reference case.

Tables

Table 1. Computation of household real income for one particular household.

	2005 (base)	2010	2015	2020	2025	2030
Nominal household income	y0	y1	y2	y3	y4	y5
Cumulative price changes (63×1 vector)		P1	P2	P3	P4	P5
Budget shares (63×1 vector)	B0	B1	B2	B3	B4	B5
Real household income	y0	$\frac{y 1}{B0' .P1}$	$\frac{y 2}{B1' .P2}$	$\frac{y 3}{B2' .P3}$	$\frac{y 4}{B3' .P4}$	$\frac{y 5}{B4' .P5}$

Table 2. Household income (in millions of dollars).

2005/2006 financial year	CGE model (MMRF)	MS model (MITTS)
Total household income	886,422	562,478
Labour	447,962	371,716
Non-labour factor income	361,125	121,770
Individual benefit payments	77,336	68,992
Unemployment benefits	5,665	5,758
Disability support pension	8,257	7,148
Age pension	21,407	22,477
Other individual benefit payments	42,007	33,609
Direct taxes on individuals	114,624	113,795
Direct taxes on enterprises	45,435	NA
Household disposable income	726,363	448,683

Table 3. Aggregate income results: reference case.

	2005 (base)	2010	2015	2020	2025	2030
The MS model (MITTS)	$m/year	Cumulative percentage changes
Gross income	494,341	22.8	37.2	55.0	75.4	96.8
Benefit payments	65,936	1.3	9.2	17.9	26.9	35.7
Income taxes + Medicare levy − rebates	123,195	22.3	35.2	50.6	68.9	88.4
Net income	440,137	19.6	33.3	50.3	69.5	89.4
Gross income + benefits	560,277	20.3	33.9	50.6	69.7	89.6
The CGE model (MMRF)
Gross income + benefits	886,422	20.9	33.4	49.6	68.6	88.7
Employment in 1000s	10,058	12.4	20.0	25.9	31.2	36.4
Basic necessities ^(a)	48.4	−1.4	−2.8	−4.6	−6.2	−7.7
Energy bundle ^(a)	11.6	−0.1	−0.5	−1.2	−1.7	−2.2
The MS model (MITTS)	Percentage
Average tax rate	24.9	24.8	24.6	24.2	24.0	23.9
Benefit payments/Gross income	13.3	11.0	10.6	10.1	9.7	9.2

Note: (a) Aggregate budget shares at percentage points. the national level (in per cent). Changes are expressed in percentage points.

Table 4. Lump sum transfers to households.

		2005	2010	2015	2020	2025	2030
Amounts in $ per year per capita
Government handout	Reference Case	0	274	475	855	1,149	1,411
	Scenario – 550ppm	0	274	303	546	760	948
	Scenario – 450ppm	0	274	190	437	650	845
Exogenous change in household income from carbon permit revenue	Reference Case	0	0	0	0	0	0
	Scenario – 550ppm	0	0	495	584	663	699
	Scenario – 450ppm	0	0	727	844	928	939
Total transfer	Reference Case	0	274	475	855	1,149	1,411
	Scenario – 550ppm	0	274	798	1,130	1,423	1,647
	Scenario – 450ppm	0	274	917	1,280	1,577	1,785
As a percentage of GDP
Total transfer	Reference Case	0	0.50	0.81	1.36	1.71	1.98
	Scenario – 550ppm	0	0.50	1.37	1.81	2.16	2.36
	Scenario – 450ppm	0	0.50	1.57	2.06	2.40	2.58

Table 5. Ratio of new weights to original sample weights: reference case.

	2005	2010	2015	2020	2025	2030
Decile 1	0.64	0.63	0.63	0.59	0.53	0.47
Decile 2	0.77	0.79	0.82	0.80	0.77	0.71
Decile 3	0.87	0.90	0.94	0.95	0.93	0.91
Decile 4	0.94	0.99	1.05	1.09	1.08	1.07
Decile 5	1.02	1.08	1.16	1.22	1.26	1.28
Decile 6	1.10	1.18	1.27	1.38	1.42	1.50
Decile 7	1.18	1.30	1.44	1.55	1.69	1.77
Decile 8	1.30	1.45	1.61	1.77	1.95	2.15
Decile 9	1.51	1.76	1.94	2.15	2.40	2.71

Note: This table should be read as follows: for 10 per cent of the records, the ratio of the new weight for 2005 (after reweighting) to the original sample weight is smaller than 0.64. For another 10 per cent of the records it is higher than 1.51.