armington elasticities for energy policy modeling evidence from four european countries elasticities of substitution among imports and competing domestic production armington elasticities play an important role in computable general equilibrium cge assessments of energy and climate policy this paper provides estimates of armington elasticities for 15 commodity groups in four european countries since armington elasticities are found to be rather low on average researchers may want to reconsider the device of using high values of armington elasticities in cge models to avoid unrealistic competitiveness effects or emission leakage rates associated with energy or carbon taxes or other forms of energy related regulation estimated elasticities tend to be higher in the case of machinery and other investment goods than in the case of primary products ores and chemicals as well as consumer goods

addressing leakage in the eu ets border adjustment or output based allocation the eu ets has been criticised for threatening the competitiveness of european industry and generating carbon leakage i e increasing foreign greenhouse gas emissions two main options have been put forward to tackle these concerns border adjustments and output based allocation i e allocation of free allowances in proportion to current production we compare various configurations of these two options as well as a scenario with full auctioning and no border adjustment against this background we develop a model of the main sectors covered by the eu ets electricity steel cement and aluminium we conclude that the most efficient way to tackle leakage is auctioning with border adjustment which generally induces a negative leakage a spillover this holds even if the border adjustment does not include indirect emissions if it is based on eu rather than foreign specific emissions or for some values of the parameters if it covers only imports another relatively efficient policy is to combine auctioning in the electricity sector and output based allocation in exposed industries especially if free allowances are given both for direct and indirect emissions i e those generated by the generation of the electricity consumed although output based allocation is generally less effective than border adjustment to tackle leakage it is more effective to mitigate production losses in the sectors affected by the ets which may ease climate policy adoption c 2011 elsevier b v all rights reserved

armington models and terms of trade effects some econometric evidence for north america elasticities of substitution among u s imports from mexico canada the rest of the world and competing domestic production are estimated for twenty two mining and manufacturing sectors based on quarterly data for 1980 88 these elasticities will provide a benchmark for computable general equilibrium models of north american trade liberalization the authors also find that estimated armington elasticities are low and therefore researchers may want to reconsider the device of using high values of armington elasticities in multicountry computable general equilibrium models to avoid large terms of trade losses associated with preferential trade liberalization

labour migration and social networks participation in southern mozambique this paper investigates how social networks in poor developing settings are affected by migration using a unique household survey from southern mozambique we test the role of labour mobility in shaping participation in groups and interhousehold cooperation by migrant sending households in village economies at origin we find that migration cum remittances boosts household engagement in community based social networks our findings are robust to alternative definitions of social interaction and to endogeneity concerns suggesting that stable migration ties and higher income stability through remittances may decrease participation constraints and increase household commitment in cooperative arrangements in migrant sending communities

curing germany s health care system by mandatory health premia a current proposal for reforming the german statutory health insurance suggests replacing earnings related contributions by per capita health premia combining a computable general equilibrium analysis with abundant empirical data on heterogenous household types we investigate both the distributional and allocative impact of such a reform proposal our results indicate efficiency gains in terms of gdp and employment this is because employed households of all skill types would increase their labour supply yet while these household types would benefit from introducing health premia others such as those including pensioners or unemployed individuals may suffer in terms of equivalent variations despite tax financed compensating transfers to these low income households nonetheless such transfers are an essential part of the reform proposal in order to mitigate redistributional effects by comparing two different compensation schemes we find that higher transfers go along with higher gdp and employment this result may indicate that more redistribution comes at no efficiency costs

cost pass through of the eu emissions allowances examining the european petroleum markets this paper explores the ability of european refineries to pass through costs associated with the introduction of the eu emissions trading scheme eu ets we estimated a sequence of vector error correction models vecm within a multi national setting which covers 14 eu member states using weekly data at the country level this paper finds a significant influence of prices for european union allowances euas on unleaded petrol retail prices during the trial phase of the eu ets from 2005 to 2007 petrol prices are found to be elastic with respect to crude oil prices and exchange rates but rather inelastic with respect to carbon costs the long run elasticity of petrol prices with respect to the eua prices typically ranges between 0 01 and 0 09 furthermore by computing the variance decomposition our analysis shows that a significant fraction of petrol price changes in austria germany france and spain can be explained by changes in allowances prices between 10 and 20

armington elasticities in intermediate inputs trade a problem in using multilateral trade data in this paper we find that the estimates of armington elasticities the elasticity of substitution between groups of products identified by country of origin obtained from multilateral trade data can differ from those obtained from bilateral trade data in particular the former tends to be higher than the latter when trade consists largely of intermediate inputs given that the variety of intermediate inputs traded across borders is increasing rapidly and that the effect of this increase is not adequately captured in multilateral trade data the evidence shows that the employment of multilateral trade data to estimate armington elasticities needs caution jel classification f14 c51 elasticites d armington dans le commerce des intrants intermediaires un probleme dans l utilisation des donnees sur le commerce international multilateral ce texte montre que les estimations des elasticites d armington c est a dire les elasticites de substitution entre groupes de biens d origines differentes basees sur les donnees de commerce multilateral peuvent etre differentes de celles obtenues en utilisant des donnees de commerce bilateral en particulier les premieres sont en general superieures aux secondes lorsque les echanges concernent surtout des biens intermediaires comme la variete des biens intermediaires echanges augmente rapidement et que les effets de cette augmentation ne sont pas captures de facon adequate dans les donnees de commerce multilateral notre resultat suggere la prudence lors de l estimation des elasticites d armington a partir de donnees de commerce multilateral

estimating the armington elasticity the importance of study design and publication bias abstract a key parameter in international economics is the elasticity of substitution between domestic and foreign goods also called the armington elasticity yet estimates vary widely we collect 3524 reported estimates of the elasticity construct 32 variables that reflect the context in which researchers obtain their estimates and examine what drives the heterogeneity in the results to account for model uncertainty we employ bayesian and frequentist model averaging to correct for publication bias we use newly developed non linear techniques our main results are threefold first there is publication bias against small and statistically insignificant elasticities second differences in results are best explained by differences in data aggregation frequency size and dimension third the elasticity implied by the literature after accounting for both publication bias and study quality lies in the range 2 5 5 1 with a median of 3 8

coal subsidization and nuclear phase out in a general equilibrium model for germany the subsidization of domestic hard coal and the future of nuclear power generation are highly controversial issues of german energy policy this paper offers an analysis of a nuclear phase out scenario and a scenario of accelerated dismantling of coal subsidies within a dynamic general equilibrium model for germany the german economy is modeled in the context of the european union because european energy markets are becoming increasingly integrated it is found that the nuclear phase out has an effect both on the sectoral and the macroeconomic level including a modest decrease in gdp and a substantial increase in co2 emissions the accelerated removal of coal subsidies has a noticeable effect on the sectoral and macroeconomic structure as well but the effect on gdp is found to be rather negligible co2 emissions are reduced only slightly because domestic coal is mainly replaced by imported coal on the basis of these findings it is conjectured that policy making on these issues is likely to be based on politics rather than strictly macroeconomic considerations

fossil fuel producing economies have greater potential for industrial interfuel substitution abstract this study analyzes industrial interfuel substitution in an international context using a large unbalanced panel dataset of 63 countries we find that compared to other countries fossil fuel producing economies have higher short term interfuel substitution elasticities this difference increases further in the long run as fossil fuel producing countries have a considerably longer adjustment of their fuel using capital stock these results imply lower economic cost for policies aimed at climate abatement and more efficient utilization of energy resources in energy intensive economies

assessing trade and welfare effects of trade liberalization abstract several numerical model experiments are used to contrast computable general equilibrium cge models explicitly incorporating imperfect competition with on the one hand textbook comparative advantage models and on the other hand competitive models based on the armington approach imperfect competition has significant effects on inter industry trade and welfare effects of trade liberalization less aggressive competition reduces elasticities of equilibrium quantities so that comparative advantage is not fully exploited the armington approximation is found to be a poor substitute for explicit incorporation of oligopolistic interaction and product differentiation at the firm level

the value added of sectoral disaggregation implications on competitive consequences of climate change policies global impact assessment of unilateral climate policies is commonly based on multi sector multi region computable general equilibrium cge models that are calibrated to consistent accounts of production consumption and bilateral trade flows however global economic databases such as gtap treat energy intensive and trade exposed industries rather in aggregate thereby missing potentially important details on the heterogeneity of these sectors in this paper we elaborate on the availability of data resources and methodological issues in disaggregating energy intensive and tradeexposed sectors that receive larger attention in the public policy debate on unilateral emission regulation non ferrous metals iron and steel and non metallic minerals our sensitivity analysis revolves around three types of unobserved heterogeneity at the sub sectoral level trade elasticities energy consumption and technology specifications drawing on the example of border tax adjustments we find that for all given technology specifications and variation in energy shares the biggest differences emerge from variations in armington elasticities even moderate changes in armington elasticities can alter the magnitude and the sign of the effects at the sectoral level the implications of sub sectoral disaggregation are not as pronounced for macroeconomic indicators and leakage as for sectoral indicators

macroanalysis of the economic and environmental impacts of a 2005 2025 european union bioenergy policy using the gtap model and life cycle assessment abstract this paper describes a new tool to assess the medium and long term economic and environmental impacts of large scale policies the approach macro life cycle assessment m lca is based on life cycle assessment methodology and includes additional elements to model economic externalities and the temporal evolution of background parameters the general equilibrium model gtap was therefore used to simulate the economic consequences of policies in a dynamic framework representing the temporal evolution of macroeconomic and technological parameters environmental impacts expressed via four indicators human health ecosystems global warming and natural resources are computed according to policy life cycle and its indirect economic consequences in order to illustrate the approach two 2005 2025 european union eu energy policies were compared using m lca the first policy the bioenergy policy aims to significantly increase energy generation from biomass and reduce eu energy demand for coal the second policy the baseline policy is a business as usual policy where year 2000 energy policies are extended to 2025 results show that compared to the baseline policy the bioenergy policy generates fewer impacts on three of the four environmental indicators human health global warming and natural resources at the world and eu scales though the results may differ significantly at a regional level the results also highlight the key contribution of economic growth to the total environmental impacts computed for the 2005 2025 period a comparison of the results with a more conventional consequential lca approach illustrates the benefits of m lca when modeling the indirect environmental impacts of large scale policies the sensitivity and uncertainty analysis indicates that the method is quite robust however its robustness must still be evaluated based on the sensitivity and uncertainty of additional parameters including the evolution of economic growth

validating energy oriented cge models although cge models have received heavy usage they are often criticized as being insufficiently validated key parameters are often not econometrically estimated and the performance of the model as a whole is rarely checked against historical outcomes as a consequence questions frequently arise as to how much faith one can put in cge results in this paper we employ a novel approach to the validation of a widely utilized global cge model gtap e by comparing the variance of model generated petroleum price distributions driven by historical demand and supply shocks to the model with observed five year moving average price distributions we conclude that energy demand in gtap e is far too price elastic over this time frame after incorporating the latest econometric estimates of energy demand and supply elasticities we revisit the validation question and find the model to perform more satisfactorily as a further check we compare a deterministic global general equilibrium simulation based on historical realizations over the 2001 2006 period during which petroleum prices rose sharply along with growing global energy demands as anticipated by the stochastic simulations the revised model parameters perform much better than the original gtap e parameters in this global general equilibrium context

pollution income dynamics this paper integrates the scale composition and technique effects of economic growth on pollution using a multi output endogenous growth framework under certain empirically verifiable parameter conditions economic growth is not sustainable even under an optimal pollution tax

unilateral co2 reductions and carbon leakage the consequences of international trade in oil and basic materials a recursively dynamic general equilibrium model featuring six world regions with trade in energy and non energy goods is used to simulate the period from 1990 through 2100 in 10 year intervals the simulations explore the effect of unilateral action by the oecd to curb global co2 emissions unilateral cuts create incentives for free riding by non participating regions so that global emissions are reduced by less than the amount that the oecd cuts back its regional emissions carbon leakage occurs through two channels first basic materials production increases in unconstrained regions resulting in increased carbon intensity of gdp second reductions in oecd oil imports cause the world oil price to fall leading to an increased energy intensity in the non participant regions in this paper we use a general equilibrium model to assess the extent to which these two mechanisms reduce the effectiveness of oecd reductions in curbing global co2 concentrations

explaining armington what determines substitutability between home and foreign goods for decades trade economists have modeled imperfect substitution between home and foreign goods in consumption often called the armington assumption with little analysis of what explains the wide variation in these substitution elasticities across sectors using a varying coefficients model the authors estimate armington elasticities between u s domestic and foreign goods across over one hundred industrial sectors from 1980 to 1988 and examine the role of product industry political and home bias factors as determinants they find strong support that the presence of foreign owned affiliates affects armington elasticities in important ways and some support that entry barriers and union presence have an effect

assessing alternative solutions to carbon leakage abstract a modified version of the computable general equilibrium gtap e model is developed in order to assess the economic and carbon emission effects of alternative trade policy measures aimed at reducing carbon leakage we compare several unilateral policy measures implemented by countries subject to an emissions level cap results provide evidence of the scarce effectiveness of these policies in reducing the carbon leakage rate and conversely some of the trade measures that are discussed seem to be more consistent with the goal of protecting market shares of national firms in the domestic markets of abating countries assessing environmental and competitiveness outcomes jointly confirms that a global cooperative solution would be the most effective as well as an efficient policy option for reducing carbon leakage

the distributional implications of a carbon tax in ireland we study the effects of carbon tax and revenue recycling across the income distribution in the republic of ireland in absolute terms a carbon tax of 20 tco2 would cost the poorest households less than 3 week and the richest households more than 4 week a carbon tax is regressive therefore however if the tax revenue is used to increase social benefits and tax credits households across the income distribution can be made better off without exhausting the total carbon tax revenue

economic implications of alternative allocation schemes for emission allowances political feasibility of emission trading systems may crucially depend on the free initial allocation of emission allowances to energy intensive industries in order to ameliorate adverse production and employment effects we investigate the potential trade off between such compensation and economic efficiency for alternative allocation rules where emission allowances are based on either emissions or output based on analytical partial equilibrium and numerical general equilibrium analysis we show that in open trading systems the trade off becomes the more severe the higher the international permit price is whenever the permit price can be considered exogenous to firms or industries the output based allocation rule is distinctly less costly than the emission based rule to preserve output and employment in energy intensive sectors the reason is that emission based allocation of allowances not only provides an implicit output subsidy but also lowers the effective price of emission inputs to regulated firms emissionbased allocation is particularly expensive towards higher international permit prices where the implicit subsidies to emission use in energy intensive sectors produce drastic efficiency losses since they imply high expenditures for carbon permit imports rather than high net revenues from efficient carbon permit exports

demand elasticities in international trade are they really low the authors analyze the u s demand for bangladeshi imports for products restricted under the multifiber arrangement because bangladesh is only a small supplier of these products and latin american and asian countries can supply close substitutes the authors expected a high elasticity of demand for bangladeshi imports and they found consistently high estimates based on statistically significant coefficients their finding accords with trade theorists prejudice that small countries can essentially behave as price takers but conflicts with the empirical literature view that demand elasticities are low rarely exceeding 3 and generally between 1 and 2 the authors analysis differs from the existing literature in three ways they derive a set of estimation equations from an explicit utility maximization model and use the estimated parameters of the utility function to obtain the marshallian own price and cross price elasticities as well as the income elasticity of demand they take explicit account of u s imports from competitors of bangladesh relying directly on competitors prices and they use highly disaggregated data that make the unit value of exports a better proxy for price than using aggregated export data commonly used in this literature the authors outline their theoretical model for deriving their estimated equations in section 1 preliminarily determine who bangladesh s competitors are in section 2 and estimate the demand equation derived in section 1 and derive the price and income elasticities facing bangladesh in section 3

an ex ante model for estimating the impact on trade flows of a country s accession to a customs union this paper presents a structural ex ante model to study the trade creation and trade diversion effects associated with a country s accession to a customs union the model extends previous studies by introducing explicitly product differentiation and exports in the determination of trade creation and trade diversion unlike the traditional vinerian analysis where the role of exports is neglected the model handles the effects of the elimination of the common external tariff facing home exports the model is then applied to portugal s accession to the european community and estimates of trade substitution elasticities are presented for 26 sectors finally these elasticities are used along with other parameter estimates to classify sectors according to whether they would give rise to trade creation or trade diversion

uncertainty management in a macro life cycle assessment of a 2005 2025 european bioenergy policy this paper examines the uncertainty of a new method the macro life cycle assessment to analyze the environmental impacts of public policies the environmental impacts of two 2005 2025 european energy policies a business as usual policy and a bioenergy policy were comparatively assessed and their uncertainty was computed following the inventory of each source of uncertainty uncertainty management methods were sequentially applied to manage these sources whenever possible results show that the bioenergy policy causes lower environmental impacts in three of the four environmental damage categories human health climate change and natural resources but more significantly in one ecosystems the risk of the business as usual policy causing lower environmental impacts is expected to be low however current knowledge makes it impossible to account for all sources of uncertainty or implement advanced uncertainty methods for all elements in the cause effects chains involved in each european energy policy current uncertainty management methods are not adapted to the uncertainty of large models such as the macro life cycle assessment hence while current results are promising further work is required to improve uncertainty management in macro life cycle assessment

regional economic impacts of biomass based energy service use a comparison across crops and technologies for east styria austria abstract biomass action plans in many european countries seek to expand biomass heat and fuel supply mainly to be supplied by peripheral agricultural regions we develop a two plus ten region energy focused computable general equilibrium cge model that acknowledges land competition in analysing the sub state local regional economic implications of such a strategy embedded within a global context our model is based on a full cost analysis of selected biomass technologies covering a range of agricultural and forestry crops as well as thermal insulation the local regional macroeconomic effects differ significantly across technologies and are governed by factors such as net labour intensity in crop production the high land intensity of agricultural biomass products crowds out conventional agriculture and thus lowers employment and drives up land prices and the consumer price index the regional economic results show that net employment effects are positive for all forestry based biomass energy and also show for which agriculture based biomass systems this is true even when accounting for land competition when regional consumer price development governs regional wages or when the agricultural sector is in strong enough competition to the international market positive employment and welfare impacts vanish fully for agriculture based bio energy

whither armington trade models the armington trade model distinguishes commodities by country of origin and import demand is determined in a separable two step procedure this framework has been applied to numerous international agricultural markets with the objective of modeling import demand in addition computable general equilibrium cge models commonly employ the armington formulation in the trade linkage equations the purpose of this paper is to test the armington assumptions of homotheticity and separability with data from the international cotton and wheat markets both parametric and nonparametric tests were performed and the empirical results reject the armington assumptions this has important implications for international trade modeling and cge modeling

applied general equilibrium models for energy studies a survey the importance of energy in any economy developed or underdeveloped became clear after the first oil shock in 1973 since then different studies were carried out to formulate energy policies and to study their impact on the economies since energy policy issues are related to various aspects of the economy such as price formation output determination income generation and distribution consumption behaviour government operation etc a coherent and systematic mechanism is required for such analysis by offering such a framework of analysis age models gained popularity among energy modellers in the 1980s the environmental issues have gained importance and the focus shifted towards curbing and containing emissions of environmentally unfriendly gases resulting from the use of energy age models because of their capability to capture the complexities of the economy have found relevance in analysing the economic impacts of controlling pollution and greenhouse gases this paper surveys the literature on such general equilibrium models as applied to energy studies and reports their special features evolution through time as well as their limitations

the costs of the kyoto protocol in the european union we estimate reference co2 emission projections in the european union and quantify the economic impacts of the kyoto commitment on member states we consider the case where each eumember individually meets a co 2 emissions target applying a country wide cap and trade system to meet the target but without trade among countries we use a version of the mit emissions prediction and policy analysis eppa model here disaggregated to separately include 9 european community countries and commercial and household transportation sectors we compare our results with that of four energy economic models that have provided detailed analyses of european climate change policy in the absence of specific additional climate policy measures the eppa reference projections of carbon emissions increase by 14 from 1990 levels the eu wide target under the kyoto protocol to the framework convention on climate change is a reduction in emissions to 8 below 1990 levels eppa emissions projections are similar to other recent modeling results but there are underlying differences in energy and carbon intensities among the projections if eucountries were to individually meet the euallocation of the community wide carbon cap specified in the kyoto protocol we find using eppa that carbon prices vary from 91 in the united kingdom to 385 in denmark welfare costs range from 0 6 to 5 r 2002 elsevier science ltd all rights reserved

taxing international emissions trading we investigate the efficiency and effectiveness consequences of emissions trading taxation a theoretical partial equilibrium model is developed showing that permits taxation distorts the equilibrium price and abatement efforts potentially counterintuitive conclusions concerning the tax revenue are also derived a cge model complements theoretical results suggesting that the change in the equilibrium permits price brought about by taxation can be significant finally we conclude that policy design based on cost effectiveness might lead to wrong conclusions the socially desirable design of emissions trading taxation requires homogenous tax rates applied to net sellers and no rebate rates allowed for net buyers