estimates of the trade elasticities, but also check if the trade structure is changing. This may be reflected by rising elasticities (the economy is becoming more flexible and responsive to trade prices) or the trade shares are shifting due to greater competitiveness and global integration, i.e., there is a trend in the trade delta shares of common functions such as the Armington and CET functions. Model selection even within the same general specifications of the CGE model means choosing among alternative formulations about how the economic structure is changing or whether it is stable. The estimation procedure is “efficient” in the sense that it uses all available information and makes no assumptions about unavailable information. Importantly, estimated parameters maintain consistency with the microeconomic foundations of the general equilibrium theory embodied in CGE models.<sup>3</sup> We make use of the collection of available comparable SAMs for different years to estimate parameters and to account for equilibrium dynamics of the country’s economic flows as postulated in the CGE model. Since SAMs are expressed in nominal values and information about relative prices may be limited, we also implement a data step by using the cross-entropy method to estimate real SAMs of the same base year and that are consistent with available information on changes in prices before parameter estimation. We use scattered information on relative prices and factor accumulation quantities, where available in order to estimate real SAMs. With each new real SAM, a parameter estimation step checks if the posterior estimates of the parameters converge to new values and whether they are stable (e.g. no trends). We consider various discrete prior probability distributions, specifying additive or multiplicative errors on behavioral and structural parameters and SAM targets to examine convergence and stability results. Since developing countries are undergoing fundamental economic transformations as they grow, the next step in our method for model selection calculates for evolution of parameters, including the elasticities, factor specific technical change, or shifts in value added and trade shares that may be important in the changing economic structure. As more estimates are made for many countries, any regularity in the estimates may further inform the pattern of development and structural change, following the work of Chenery and various coauthors (Chenery, H. B., et al. 1975, Chenery, H. B. and H. Elkington 1979, Chenery, H. B., et al. 1986).

In the case of Korea, the CGE-SAM-cross-entropy (CGE-SAM-CE) method is applied to selected years in the period 1990 to 2011 to estimate economic a set of behavioral parameters: the elasticities of substitution between traded goods and domestic goods and between factors in production functions. We also explore for possible changes in the relative levels of sectoral value-added and its factor components through the growth of total factor productivity (TFP) and labor-augmenting productivity (LAP) in the value added function of each sector, as well as the evolution in economic and trade structure as reflected in trends of trade elasticities and trade shares over time.

As the availability of datasets for global CGE modeling is improving thanks to the Global Trade Analysis Project (GTAP) at Purdue University and other activities, regional units that are aggregation of multiple countries and their corresponding SAMs are becoming popular in CGE modeling, but the availability of regional price data still lags. We therefore also look at a regional application to Sub-Saharan

> 3 See Arnold Zellner’s definition of an efficient “information processing rule” in Zellner, A. (1988).

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