Armington and constant-elasticity-of-transformation (CET) functions are routinely used in computa... more Armington and constant-elasticity-of-transformation (CET) functions are routinely used in computable general equilibrium (CGE) Models to model foreign trade. The CET function is applied to producer decisions about whether to export and or sell at home. Decisions by domestic demanders whether to purchase imports or domestic output are covered by the Armington function. The Armington function is a constant-elasticity-of-substitution (CES) function. This note is concerned with the links between (a) price elasticities of import demand and constant elasticities of substitution between demand for imports and domestic output; and (b) price elasticities of export supply and constant elasticities of transformation between supply to exports and domestic market. These links are important since researchers often may wish to compare estimates of price elasticities to the price elasticities implied by elasticities of substitution and transformation. In this note, price elasticities related to eac...
In recent years, world food prices have increased and fluctuated widely. This paper explores the ... more In recent years, world food prices have increased and fluctuated widely. This paper explores the impact of international food prices and domestic policies on Millennium Development Goal (MDG) and macro indicators for two archetype low-income countries, a net food exporter and a net food importer, using Maquette for MDG Simulations (MAMS), a Computable General Equilibrium model. The simulations, which cover the period 2011-2025, indicate that the size of positive (negative) effects on macro and MDG indicators of a food export (import) price increase depend on the initial gross domestic product share for food exports (imports), leaving countries that are heavily involved in international food trade more exposed to international shocks. Given relatively low elasticity estimates, the impact of changes in food prices on undernourishment are relatively marginal. Flexible responses (in terms of production shares, whether output is exported or sold at home, and whether domestic demanders bu...
This paper addresses policies aimed at closing the rural-urban gap for one of the Millennium Deve... more This paper addresses policies aimed at closing the rural-urban gap for one of the Millennium Development Goals (MDGs), the under-five mortality rate (U5MR). The paper relies on the Maquette for MDG Simulations (MAMS), a computable general equilibrium model, applied to the database of an archetypical low-income country. The scenarios, which focus on the period 2013-2030, include a"business-as-usual"base scenario and policy scenarios that analyze efforts to raise the rural population up to the urban level in terms of health services or the under-five mortality rate. The policy scenarios are implemented with alternative sources of fiscal space. The results indicate that, if current trends continue, considerable progress for MDGs should be expected by 2030. If the government raises rural health services, then the decline in the rural U5MR would accelerate. If most additional resources come from foreign grants or government efficiency gains, then the repercussions for other dev...
This paper uses a three-step Bayesian cross-entropy estimation approach in an environment of nois... more This paper uses a three-step Bayesian cross-entropy estimation approach in an environment of noisy and scarce data to estimate behavioral parameters for a computable general equilibrium (CGE) model and to measure how labor augmenting productivity and other structural parameters in the model may have shifted over time to contribute to the generation of historically observed changes in the economic arrangement. In this approach, the parameters in a CGE model are treated as fixed but unobserved, which we represent as prior mean values with prior error mass functions. Estimation of the parameters involves using an informationtheoretic Bayesian approach to exploit additional information in the form of new data from a series of Social Accounting Matrices (SAMs), which we assume were measured with error. The estimation procedure is "efficient" in the sense that it uses all available information and makes no assumptions about unavailable information. As illustration, we apply the ...
Emerging empirical evidence and microeconomic theory suggest strongly that, in many developing co... more Emerging empirical evidence and microeconomic theory suggest strongly that, in many developing country settings, farm household production and consumption decisions are "nonseparable"; that is, the farm household cannot be viewed as a separate or independent profit-maximizing producer and utility-maximizing consumer. The existence of such nonseparability indicates the presence of market imperfections or failures that may have important policy implications. For example, depending on the nature of the market imperfections, there may be "threshold" effects whereby policy changes have no effect on household behavior until the change is "large" in some measure. In this environment, policy analysis assuming the existence of perfect markets may badly misstate the impact of policy changes on producer behavior and household welfare.
Operating with limited domestic and foreign resources, and highly dependent on foreign aid, Ethio... more Operating with limited domestic and foreign resources, and highly dependent on foreign aid, Ethiopia faces difficult choices between spending, for example, in public infrastructure versus human development. This paper uses MAMS (Maquette for MDG Simulations) to analyze the consequences of such spending decisions on the evolution of major social and economic indicators during the period up to 2015, including the Millennium Development Goals (MDGs) for poverty, education, health, water, and sanitation. The model is built around a SAM for fiscal year 2002, complemented by a database focused on education and other MDG-related information for the same year. The simulations are designed to better understand the trade-offs between spending on human development (with a long-run positive impact on production as the educational level of the labor force improves) and spending on roads, energy, and other forms of public infrastructure (which has a more direct impact on productivity and producti...
Morocco is about to start implementing an Association Agreement with the European Union (AAEU) at... more Morocco is about to start implementing an Association Agreement with the European Union (AAEU) at the same time as the country adjusts its trade policies to conform to WTO rules. A major policy question facing Morocco's policy makers is whether and to what extent they should pursue additional unilateral trade liberalization. Given that Morocco's agriculture currently enjoys substantial protection, additional trade liberalization is expected to have a detrimental impact on rural households, including many poor.
... Afaf Abdel-Aziz and her staff at Egypt's Ministry of Agriculture deserve special thanks ... more ... Afaf Abdel-Aziz and her staff at Egypt's Ministry of Agriculture deserve special thanks for organizing and implementing the survey in Minoufia. Partial financial support for this study from USAID, Cairo and the Soderstrom Foundation, Stockholm, is gratefully acknowledged. ...
Abstract As a result of antimicrobial resistance (AMR), economies will experience an increase in ... more Abstract As a result of antimicrobial resistance (AMR), economies will experience an increase in mortality, reduced productivity for labor and the livestock sector, and increased health care costs. This paper assesses the potential global poverty impacts of AMR using a unique macro-micro framework. To estimate poverty effects of AMR, price, wage, and employment results from a dynamic, multi-country, multi-sector computable general equilibrium CGE model are used in a microsimulation model that integrates household surveys from 104 countries. The analysis in this paper advances other studies of AMR in two ways: (1) it links macro results to a microsimulation model to provide insight on poverty impacts for the world economy and countries of different income levels; and (2) it uses a global multi-sector model, rather than an aggregate global model, to generate macroeconomic results with structural details for capturing the economy-wide impact within countries and the spread across countries via trade flows. Relative to a world without AMR, the progression of antimicrobial resistance is expected to make it more difficult to eliminate extreme poverty, potentially adding 24.1 million people to become extremely poor, of whom 18.7 million live in low-income countries. The expected losses during 2015–50 may sum to $85 trillion in gross domestic product and $23 trillion in global exports (in present value). By 2050, the global gross domestic product could deviate negatively by 3.8 percent from the baseline (in the worst-case scenario considered). Because it is a global public bad, the optimal policy response will require global cooperation. The poverty outcomes induced by AMR in all country groups will deteriorate with short-sighted isolationist policies. Moreover, assistance from high-income countries to improve the economic resiliency of lower-income countries will also benefit the higher-income countries and world economy in general.
Armington and constant-elasticity-of-transformation (CET) functions are routinely used in computa... more Armington and constant-elasticity-of-transformation (CET) functions are routinely used in computable general equilibrium (CGE) Models to model foreign trade. The CET function is applied to producer decisions about whether to export and or sell at home. Decisions by domestic demanders whether to purchase imports or domestic output are covered by the Armington function. The Armington function is a constant-elasticity-of-substitution (CES) function. This note is concerned with the links between (a) price elasticities of import demand and constant elasticities of substitution between demand for imports and domestic output; and (b) price elasticities of export supply and constant elasticities of transformation between supply to exports and domestic market. These links are important since researchers often may wish to compare estimates of price elasticities to the price elasticities implied by elasticities of substitution and transformation. In this note, price elasticities related to eac...
In recent years, world food prices have increased and fluctuated widely. This paper explores the ... more In recent years, world food prices have increased and fluctuated widely. This paper explores the impact of international food prices and domestic policies on Millennium Development Goal (MDG) and macro indicators for two archetype low-income countries, a net food exporter and a net food importer, using Maquette for MDG Simulations (MAMS), a Computable General Equilibrium model. The simulations, which cover the period 2011-2025, indicate that the size of positive (negative) effects on macro and MDG indicators of a food export (import) price increase depend on the initial gross domestic product share for food exports (imports), leaving countries that are heavily involved in international food trade more exposed to international shocks. Given relatively low elasticity estimates, the impact of changes in food prices on undernourishment are relatively marginal. Flexible responses (in terms of production shares, whether output is exported or sold at home, and whether domestic demanders bu...
This paper addresses policies aimed at closing the rural-urban gap for one of the Millennium Deve... more This paper addresses policies aimed at closing the rural-urban gap for one of the Millennium Development Goals (MDGs), the under-five mortality rate (U5MR). The paper relies on the Maquette for MDG Simulations (MAMS), a computable general equilibrium model, applied to the database of an archetypical low-income country. The scenarios, which focus on the period 2013-2030, include a"business-as-usual"base scenario and policy scenarios that analyze efforts to raise the rural population up to the urban level in terms of health services or the under-five mortality rate. The policy scenarios are implemented with alternative sources of fiscal space. The results indicate that, if current trends continue, considerable progress for MDGs should be expected by 2030. If the government raises rural health services, then the decline in the rural U5MR would accelerate. If most additional resources come from foreign grants or government efficiency gains, then the repercussions for other dev...
This paper uses a three-step Bayesian cross-entropy estimation approach in an environment of nois... more This paper uses a three-step Bayesian cross-entropy estimation approach in an environment of noisy and scarce data to estimate behavioral parameters for a computable general equilibrium (CGE) model and to measure how labor augmenting productivity and other structural parameters in the model may have shifted over time to contribute to the generation of historically observed changes in the economic arrangement. In this approach, the parameters in a CGE model are treated as fixed but unobserved, which we represent as prior mean values with prior error mass functions. Estimation of the parameters involves using an informationtheoretic Bayesian approach to exploit additional information in the form of new data from a series of Social Accounting Matrices (SAMs), which we assume were measured with error. The estimation procedure is "efficient" in the sense that it uses all available information and makes no assumptions about unavailable information. As illustration, we apply the ...
Emerging empirical evidence and microeconomic theory suggest strongly that, in many developing co... more Emerging empirical evidence and microeconomic theory suggest strongly that, in many developing country settings, farm household production and consumption decisions are "nonseparable"; that is, the farm household cannot be viewed as a separate or independent profit-maximizing producer and utility-maximizing consumer. The existence of such nonseparability indicates the presence of market imperfections or failures that may have important policy implications. For example, depending on the nature of the market imperfections, there may be "threshold" effects whereby policy changes have no effect on household behavior until the change is "large" in some measure. In this environment, policy analysis assuming the existence of perfect markets may badly misstate the impact of policy changes on producer behavior and household welfare.
Operating with limited domestic and foreign resources, and highly dependent on foreign aid, Ethio... more Operating with limited domestic and foreign resources, and highly dependent on foreign aid, Ethiopia faces difficult choices between spending, for example, in public infrastructure versus human development. This paper uses MAMS (Maquette for MDG Simulations) to analyze the consequences of such spending decisions on the evolution of major social and economic indicators during the period up to 2015, including the Millennium Development Goals (MDGs) for poverty, education, health, water, and sanitation. The model is built around a SAM for fiscal year 2002, complemented by a database focused on education and other MDG-related information for the same year. The simulations are designed to better understand the trade-offs between spending on human development (with a long-run positive impact on production as the educational level of the labor force improves) and spending on roads, energy, and other forms of public infrastructure (which has a more direct impact on productivity and producti...
Morocco is about to start implementing an Association Agreement with the European Union (AAEU) at... more Morocco is about to start implementing an Association Agreement with the European Union (AAEU) at the same time as the country adjusts its trade policies to conform to WTO rules. A major policy question facing Morocco's policy makers is whether and to what extent they should pursue additional unilateral trade liberalization. Given that Morocco's agriculture currently enjoys substantial protection, additional trade liberalization is expected to have a detrimental impact on rural households, including many poor.
... Afaf Abdel-Aziz and her staff at Egypt's Ministry of Agriculture deserve special thanks ... more ... Afaf Abdel-Aziz and her staff at Egypt's Ministry of Agriculture deserve special thanks for organizing and implementing the survey in Minoufia. Partial financial support for this study from USAID, Cairo and the Soderstrom Foundation, Stockholm, is gratefully acknowledged. ...
Abstract As a result of antimicrobial resistance (AMR), economies will experience an increase in ... more Abstract As a result of antimicrobial resistance (AMR), economies will experience an increase in mortality, reduced productivity for labor and the livestock sector, and increased health care costs. This paper assesses the potential global poverty impacts of AMR using a unique macro-micro framework. To estimate poverty effects of AMR, price, wage, and employment results from a dynamic, multi-country, multi-sector computable general equilibrium CGE model are used in a microsimulation model that integrates household surveys from 104 countries. The analysis in this paper advances other studies of AMR in two ways: (1) it links macro results to a microsimulation model to provide insight on poverty impacts for the world economy and countries of different income levels; and (2) it uses a global multi-sector model, rather than an aggregate global model, to generate macroeconomic results with structural details for capturing the economy-wide impact within countries and the spread across countries via trade flows. Relative to a world without AMR, the progression of antimicrobial resistance is expected to make it more difficult to eliminate extreme poverty, potentially adding 24.1 million people to become extremely poor, of whom 18.7 million live in low-income countries. The expected losses during 2015–50 may sum to $85 trillion in gross domestic product and $23 trillion in global exports (in present value). By 2050, the global gross domestic product could deviate negatively by 3.8 percent from the baseline (in the worst-case scenario considered). Because it is a global public bad, the optimal policy response will require global cooperation. The poverty outcomes induced by AMR in all country groups will deteriorate with short-sighted isolationist policies. Moreover, assistance from high-income countries to improve the economic resiliency of lower-income countries will also benefit the higher-income countries and world economy in general.
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Papers by Hans Lofgren