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Kiel Institute for World Economics Kiel Working Papers, Kiel Institute for World Economics

No 1731:
Forward looking dynamics in spatial CGE modelling

Johannes Bröcker and Artem Korzhenevych

Abstract: This paper sets up a multiregional dynamic framework by combining the optimal savings model with investment adjustment costs and the spatially disaggregated model with Dixit-Stiglitz structure in the modern sector. Because of increasing product diversity on the dynamic equilibrium path, the model belongs to the category of semi-endogenous growth models. The distinction of goods, factors, firms, and households by location, and the incorporation of trade costs in the model allow to study a variety of issues in regional and transport economics. We describe the model calibration and a taylor-made solution algorithm. The functionality is demonstrated using two illustrative examples

Keywords: spatial dynamic CGE modeling, multiple optimizing agents, transport costs; (follow links to similar papers)

JEL-Codes: Q54,; O33,; H87; (follow links to similar papers)

26 pages, September 2011

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