Computable General equilibrium Models in Environmental and Resource Economics

Klaus Conrad

No 601, Discussion Papers from Institut fuer Volkswirtschaftslehre und Statistik, Abteilung fuer Volkswirtschaftslehre

Abstract: The focus of this survey chapter is on the importance of general equilibrium interactions in assessing efficiency costs of environmental policies. Those interactions are relevant to the impacts of a wide range of government policies to control air pollution, deforestation or water quality. These policies raise the costs of output and the distortions in factor markets from preexisting market imperfections and imply higher social costs than would be indicated by partial equilibrium models. Although computable general equilibrium models (CGE models) cannot be used to forecast business cycles, they can indicate likely magnitudes of policy-induced changes from future baselines, and they are indispensable for ranking alternative policy measures. Since these numerical models are based on assumptions concerning the economic development (elasticities of substitution, technical change, or the magnitude of exogenous variables) it would be misleading to base policy decisions on a specific numerical result. Rather, CGE models should be used to understand the reasons for particular results, to better frame the policy decisions, and to support the appropriate policy judgements. Using general equilibrium theory, economists can very often get a good idea of the welfare effect and of the qualitative results from a change in a given policy instrument.

Date: 2001
References: Add references at CitEc
Citations: View citations in EconPapers (8)

Downloads: (external link)
https://madoc.bib.uni-mannheim.de/1010/1/601.pdf

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:mnh:vpaper:1010

Access Statistics for this paper

More papers in Discussion Papers from Institut fuer Volkswirtschaftslehre und Statistik, Abteilung fuer Volkswirtschaftslehre Contact information at EDIRC.
Bibliographic data for series maintained by Katharina Rautenberg ().