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Demonstration of capabilities of a bi- regional CGE model to assess impacts of rural development policies (RURMOD-E) Demonstration Workshop Brussels, 26.11.2008
Demonstration of capabilities of a bi-regional CGE model to assess impacts of rural development policies (RURMOD-E)
Demonstration WorkshopBrussels, 26.11.2008
SENSITIVITY ANALYSIS-
ROBUSTNESS
Eudokia Balamou
Department of Economics
University of Patras
Two important issues in CGE models:
1. How the equilibrium relationships are obtained (elasticities) quantify how production, consumption, etc. adjust to altered economic conditions
2. How the model is closed (closure rules) reflect assumptions on how markets operate
However choice of elasticities and closure rules have no effect on the calibration of the models have a considerable effect on simulation results
Introduction
Sensitivity analysis is needed to test for the robustness of the findings
Question to be answered: Are results affected by small or large amounts? Does the distribution of effects change?
• in terms of direction of impacts
• in terms of distribution of effects across rural-urban space
Introduction
Sensitivity Analysis: Change of labour markets
Archanes-Heraklion Keynesian labor market
District Bruntal Neoclassical labor market Double the level of Armington elasticities
Presentation of results for 2 scenarios: Soft modulation RDM-AGRI (Axes 1, 2)ultural Centered RD
Measures
Sensitivity Analysis
Archanes - Heraklion GDP at factor Cost
Results of Sensitivity Analysis-Labor Closure
SOFTMOD SOFTMOD(S)RDM-AGRI (Axes 1, 2)
RDM-AGRI (Axes 1, 2)(S)
Rural 3.92 3.65 -1,08 -1,29
Primary -1.48 -1.28 -0,83 -1,03
Secondary 1.87 1.43 -6,71 -7,03
Tertiary 9.20 8.89 -0,35 -0,54
Urban -0.01 -0.60 0,05 -0,55
Primary -8.96 -9.93 -8,26 -9,20
Secondary -6.60 -7.81 0,83 -0,53
Tertiary 1.50 1.02 0,28 -0,17
Total 0.16 -0.42 0,00 -0,58
Archanes – Heraklion: Domestic Production
SOFTMOD SOFTMOD (S)RDM-AGRI (Axes 1, 2)
RDM-AGRI (Axes 1, 2) (S)
Primary -6.35 -6.98 -6,11 -6,74
Secondary -6.15 -7.30 0,09 -1,18
Tertiary 1.79 1.29 0,27 -0,20
Total -0.10 -0.74 0.10 0.54
Archanes – Heraklion: Producer Prices
SOFTMOD SOFTMOD(S)RDM-AGRI (Axes 1, 2)
RDM-AGRI (Axes 1, 2)(S)
Primary 5.73 5.75 8,47 8,44
Secondary 0.58 0.62 1,26 1,29
Tertiary -9.77 -9.85 -8,88 -8,96
Results of Sensitivity Analysis-Labor Closure
Archanes – Heraklion: Factor Income
SOFTMOD SOFTMOD(S)RDM-AGRI (Axes 1, 2)
RDM-AGRI (Axes 1, 2)(S)
F-Uns. Labor -0.95 -1.59 -1,23 -1,86
F-Sk. Labor 0.44 -0.12 0,06 -0,49
F-Capital 0.38 -0.14 0,02 -0,49
F-RAgr.Land -9.51 -9.91 -8,90 -9,30
F-RLandH 2.00 1.49 3,99 3,53
F-ULandH 0.54 -0.03 0,05 -0,50
F-AGCAP -19.96 -20.84 -17,86 -18,76
F-AGRENTS -18.70 -19.49 -16,45 -17,27
Results of Sensitivity Analysis-Labor Closure
What did the sensitivity analysis on closure rules show?
1. In some cases there is a change of sign from + to –
• GDP urban sectors from RDM-AGRI (Axes 1, 2) scenario
• Domestic Production secondary-tertiary prod. (only RDM-AGRI (Axes 1, 2))
• Factor Income Skill Labor and Capital from
both scenarios
2. No significant changes in terms of the magnitude of effects
Results of Sensitivity Analysis-Labor Closure
District Bruntal GDP at factor Cost
SOFTMOD SOFTMOD (S)RDM-AGRI (Axes 1, 2)
RDM-AGRI (Axes 1, 2)(S)
Rural 0.03 0.00 1.78 0.14
Primary -0.07 -0.01 1.82 0.13
Secondary -0.02 -0.05 2.76 0.85
Tertiary 0.07 0.04 1.05 -0.38
Urban 0.03 0.00 1.10 -0.07
Secondary -0.02 -0.06 1.41 -0.06
Tertiary 0.06 0.03 0.93 -0.08
Total 0.03 0.00 1.25 -0.03
Results of Sensitivity Analysis-Labor Closure
District Bruntal: Domestic Production
SOFTMOD SOFTMOD(S)RDM-AGRI (Axes 1, 2)
RDM-AGRI (Axes 1, 2)(S)
Primary -26.83 -24.70 -25,44 -24.54
Secondary -1.38 0.31 0,61 0.65
Tertiary -0.31 0.52 0,86 0.51
Total -1.08 0.11 0,38 0.23
District Bruntal: Producer Prices
SOFTMOD SOFTMOD(S)RDM-AGRI (Axes 1, 2)
RDM-AGRI (Axes 1, 2)(S)
Primary 20.59 19.74 11.53 10.54
Secondary 0.19 -0.11 0.27 0.17
Tertiary -1.19 -0.66 0.65 0.67
Results of Sensitivity Analysis-Labor Closure
District Bruntal: Factor Income
SOFTMOD SOFTMOD(S)RDM-AGRI (Axes 1, 2)
RDM-AGRI (Axes 1, 2)(S)
F-R.Uns. Labor -4.78 -5.24 -2,09 -3,42
F-R.Sk. Labor -2.60 -2.89 -0,23 -1,35
F-U.Uns. Labor -0.90 0.34 0,79 0,82
F-U.Sk. Labor -0.86 0.36 0,86 0,90
F-Capital -1.23 -0.10 0,67 0,54
F-R.Agr.Land -4.81 -3.52 0,82 0,22
F-RLandH -1.11 -0.90 1,11 0,34
F-ULandH -1.71 0.27 1,24 1,42
F-AGCAP -43.74 -42.68 -41,39 -41,41
F-AGRENTS -43.74 -42.68 -41,39 -41,41
Results of Sensitivity Analysis-Labor Closure
What did the sensitivity analysis on closure rules show?
1. No changes in sign in the case of the GDP
2. Changes in sign in the case of the SOFTMOD in domestic production and in Urban Unskilled and Skilled Labor and Urban Land Housing.
3. No significant changes in terms of the magnitude of effects
Results of Sensitivity Analysis-Labor Closure
Archanes - Heraklion GDP at factor Cost
Results of Sensitivity Analysis-Elasticities
SOFTMOD SOFTMOD(S)RDM-AGRI (Axes 1, 2)
RDM-AGRI (Axes 1, 2) (S)
Rural 3.92 2.70 -1,08 -1,99
Primary -1.48 -1.68 -0,83 0,14
Secondary 1.87 0.17 -6,71 -24,06
Tertiary 9.20 7.12 -0,35 -0,14
Urban -0.01 0.04 0,05 0,11
Primary -8.96 -9.81 -8,26 -7,92
Secondary -6.60 -6.10 0,83 0,17
Tertiary 1.50 1.51 0,28 0,46
Total 0.16 0.16 0,00 0,02
Archanes – Heraklion: Domestic Production
SOFTMOD SOFTMOD (S)RDM-AGRI (Axes 1, 2)
RDM-AGRI (Axes 1, 2) (S)
Primary -6.35 -7.32 -6.11 -5,01
Secondary -6.15 -5.86 0.09 -0,99
Tertiary 1.79 1.76 0.27 0,43
Total -0.10 -0.08 0.10 0.01
Archanes – Heraklion: Producer Prices
SOFTMOD SOFTMOD(S)RDM-AGRI (Axes 1, 2)
RDM-AGRI (Axes 1, 2)(S)
Primary 5.73 4.19 8,47 15,23
Secondary 0.58 0.49 1,26 1,24
Tertiary -9.77 -9.59 -8,88 -9,50
Results of Sensitivity Analysis-Elasticities
Archanes – Heraklion: Factor Income
SOFTMOD SOFTMOD(S)RDM-AGRI (Axes 1, 2)
RDM-AGRI (Axes 1, 2)(S)
F-Uns. Labor -0.95 -0.96 -1,23 -1,73
F-Sk. Labor 0.44 0.54 0,06 -0,36
F-Capital 0.38 0.47 0,02 -0,42
F-R.Agr. Land -9.51 -10.65 -8,90 -9,58
F-RLandH 2.00 1.29 3,99 0,59
F-ULandH 0.54 0.65 0,05 -0,45
F-AGCAP -19.96 -21.65 -17,86 -16,44
F-AGRENTS -18.70 -20.33 -16,45 -14,68
Results of Sensitivity Analysis-Elasticities
What did the sensitivity analysis on elasticities?
1. In some cases there is a change of sign but this are very limited (only in GDP and factor income)
2. No significant changes in terms of the magnitude of effects
Results of Sensitivity Analysis-Elasticities
District Bruntal GDP at factor Cost
Results of Sensitivity Analysis-Elasticities
SOFTMOD SOFTMOD (S)RDM-AGRI (Axes 1, 2)
RDM-AGRI (Axes 1, 2)(S)
Rural 0.03 0.02 1.78 1.52
Primary -0.07 -0.05 1.82 4.66
Secondary -0.02 -0.01 2.76 2.35
Tertiary 0.07 0.05 1.05 0.72
0.85Urban 0.03 0.02 1.10 0.85
Secondary -0.02 -0.01 1.41 1.31
Tertiary 0.06 0.04 0.93 0.60
Total 0.03 0.02 1.25 0.99
District Bruntal: Domestic Production
SOFTMOD SOFTMOD(S)RDM-AGRI (Axes 1, 2)
RDM-AGRI (Axes 1, 2)(S)
Primary -26.83 -31.00 -25,44 -28,23
Secondary -1.38 -1.50 0,61 0,28
Tertiary -0.31 -0.01 0,86 0,80
Total -1.08 -1.02 0,38 0,18
District Bruntal: Producer Prices
Results of Sensitivity Analysis-Elasticities
SOFTMOD SOFTMOD(S)RDM-AGRI (Axes 1, 2)
RDM-AGRI (Axes 1, 2)(S)
Primary 20.59 13.40 11.53 8.73
Secondary 0.19 0.17 0.27 0.23
Tertiary -1.19 -0.99 0.65 0.64
District Bruntal: Factor Income
Results of Sensitivity Analysis-Elasticities
SOFTMOD SOFTMOD(S)RDM-AGRI (Axes 1, 2)
RDM-AGRI (Axes 1, 2)(S)
F-R.Uns. Labor -4.78 -5.06 -2,09 -2,69
F-R.Sk. Labor -2.60 -2.57 -0,23 -0,61
F-U.Uns. Labor -0.90 -0.74 0,79 0,59
F-U.Sk. Labor -0.86 -0.66 0,86 0,68
F-Capital -1.23 -1.06 0,67 0,42
F-R.Agr.Land -4.81 -4.47 0,82 1,37
F-RLandH -1.11 -0.83 1,11 0,92
F-ULandH -1.71 -1.60 1,24 1,01
F-AGCAP -43.74 -49.39 -41,39 -45,23
F-AGRENTS -43.74 -49.39 -41,39 -45,23
What did the sensitivity analysis on elasticities?
1. No significant changes in terms of sign
2. No significant changes in terms of the magnitude of effects
Results of Sensitivity Analysis-Elasticities
Sensitivity analysis was carried out to test for the robustness of the findings Policy simulations were repeated assuming
• different labor market closure rules
(Keynesian vs. Neoclassical)
• double the levels of Armington elasticities Both models are a little bit sensitive in term of change in labor market closure rule especially for GDP and factor income.
Conclusions
Both models not sensitive to changes in elasticities: the results were affected but by small amounts and there were no qualitative changes in terms of direction of impacts or distribution of effects across rural-urban space. Need to be very careful when it comes to the choice of closure rules and elasticitiesClosure rules must be suitable for the study region in order to reflex the “correct” results
Conclusions
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