Sang-Ho Nam - Integration of Regional CGE Model and Administrative Household Data

  • Presenting author: Sang-Ho Nam (Adelman Institute for Economics)

  • Authors: Sang-Ho Nam

  • Session: C01D - Micro-Macro Linkage - Wednesday 9:00-10:30 - Erika-Weinzierl Hall

Sixty years have passed when the Leif Johansen developed the first CGE or MSG model with official macro statistics. Since then the major concern of most economists lied on the issue of growth and distribution nexus, and the household heterogeneity became especially important.

It is well known that the standard national CGE model with representative households cannot capture the microeconomic effects of the proposed policy.

A possible solution to this problem is to use the administrative household data published by the government.

In this paper, we use the Regional CGE model which has 17 NUTS-1 regions and 33 sectors (commodity and/or industries). For this purpose, the TERM (The Enormous Regional Model) of Mark Horridge (2002) is applied to the South Korean Economy (TERM-KOR). In order to incorporate the household heterogeneity, we use grouped household with income decile for each 17 NUTS-1 regions.

From the Regional CGE model, we can get regional macroeconomic results such as effects on production, employment, value-added, consumption, and prices. The sectoral effects of the above-mentioned variables by region is also available.

The administrative household data is combined at the next stage in a top-down manner. Then we can get microeconomic effects (such as poverty, inequality, and/or polarization) of the national welfare policy.

The advantage of employing this analysis tool is that it can consider intermediate inputs in the production process, inter-relationships among economic institutions, and heterogeneity of households in a single computable general equilibrium model. In addition to that, we can get most of the wanted results on microeconomic effects (by regional as well as national) from the macro policy.