Modeling Developing Countries' Policies In General Equilibrium

Policies affecting resource allocation across tradable sectors and those affecting the incentives to produce tradable activities are key determinants of macroeconomic balance and growth. Computable general equilibrium models have made significant contributions to both types of policies. With advancements in computing power and software, these models have become easy to implement and are now widespread. The question then is when and how to formulate them to avoid the ‘black box’ syndrome. This book seeks to address these issues through carefully selected essays that analyse how to model general equilibrium linkages in a single economy, across developing and developed economies, and across both micro and macro policies. Micro policies examined include tariffs quotas and VERs, the choice of taxes to maximize government revenue, migration and remittances, and the political economy of tariff setting. Applications on macro policies cover capital inflows, real exchange rate determination, and the modeling of the effects of adjustment policies on income distribution. The book provides insights on the development of a family of models for diverse policy choices, focusing on the ways to model the following: links between tradable and non-tradable activities, labor markets, and portfolio choices given limited capital mobility. Selected essays are all inspired by specific policy problems, including the adaptation to external shocks (i.e. oil), consequences of capital inflows, determinants of migration and associated remittances, the productivity of foreign aid, and rent-seeking activities under trade regimes with non-price trade restrictions. Examples in this book lay out the theoretical foundations, alongside a variety of applications, to help formulate coherent and transparent models for policy analysis. Archetype economies are extensively used to show how differences in economic structure influence the effects of policies. Graduate students and policy analysts interested in modeling will find this a useful compendium of studies.Contents: Capturing Economy-Wide Linkages: Product Differentiation and the Treatment of Foreign Trade in Computable General Equilibrium Models of Small Economies ((with Sherman Robinson) Productivity and Externalities: Models of Export-Led Growth ((with Sherman Robinson) A General Equilibrium Analysis of Foreign Exchange Shortages in a Developing Economy (with Kemal Dervis and Sherman Robinson) Productivity Growth, External Shocks and Capital Inflows in Chile: A General Equilibrium Analysis (with Timothy Condon and Vittorio Corbo) Exchange Rate-Based Disinflation, Wage Rigidity and Capital Inflows: Tradeoffs for Chile 1977–81 (with Timothy Condon and Vittorio Corbo) Adjustment and Income Distribution: A Micro–Macro Model for Counterfactual Analysis (with François Bourguignon and William Branson) Computable General Equilibrium Models for Trade Policy Analysis in Developing Countries: A Survey Archetype Economies: Alternative Routes to Development (with Hollis Chenery, Jeffrey Lewis and Sherman Robinson) Trade Adjustment Policies and Income Distribution in Three Archetype Developing Economies (with Sherman Robinson) Distributional Effects of Adjustment Policies: Simulations for Archetype Economies in Africa and Latin America (with François Bourguignon and Akiko Suwa) Modeling the Effects of Protection in a Dynamic Framework (with Kemal Dervis) Lobbying, Counterlobbying, and the Structure of Tariff Protection in Poor and Rich Countries (with Olivier Cadot and Marcelo Olarreaga) Globalization and Migratory Pressures from Developing Countries: A Simulation Analysis (with Riccardo Faini and Jean-Marie Grether) Costs of Protection from Trade Policy Regimes in Developing Countries: Distortions in the Factor Market: Some General Equilibrium Estimates Trade Policy and Resource Allocation in the Presence of Product Differentiation (with Sherman Robinson) An Evaluation of Neutral Trade Policy Incentives under Increasing...