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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 Workshop Brussels, 26.11.2008. SENSITIVITY ANALYSIS- ROBUSTNESS. Eudokia Balamou Department of Economics University of Patras. Introduction.

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Demonstration Workshop Brussels, 26.11.2008

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  1. Demonstration of capabilities of a bi-regional CGE model to assess impacts of rural development policies (RURMOD-E) Demonstration WorkshopBrussels, 26.11.2008

  2. SENSITIVITY ANALYSIS- ROBUSTNESS Eudokia Balamou Department of Economics University of Patras

  3. Introduction Two important issues in CGE models: • How the equilibrium relationships are obtained (elasticities)  quantify how production, consumption, etc. adjust to altered economic conditions • 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

  4. 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

  5. Sensitivity Analysis 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

  6. Results of Sensitivity Analysis-Labor Closure Archanes - Heraklion  GDP at factor Cost

  7. Results of Sensitivity Analysis-Labor Closure Archanes – Heraklion: Domestic Production Archanes – Heraklion: Producer Prices

  8. Results of Sensitivity Analysis-Labor Closure Archanes – Heraklion: Factor Income

  9. Results of Sensitivity Analysis-Labor Closure What did the sensitivity analysis on closure rules show? • 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 • No significant changes in terms of the magnitude of effects

  10. Results of Sensitivity Analysis-Labor Closure District Bruntal  GDP at factor Cost

  11. Results of Sensitivity Analysis-Labor Closure District Bruntal: Domestic Production District Bruntal: Producer Prices

  12. Results of Sensitivity Analysis-Labor Closure District Bruntal: Factor Income

  13. Results of Sensitivity Analysis-Labor Closure What did the sensitivity analysis on closure rules show? • No changes in sign in the case of the GDP • Changes in sign in the case of the SOFTMOD in domestic production and in Urban Unskilled and Skilled Labor and Urban Land Housing. • No significant changes in terms of the magnitude of effects

  14. Results of Sensitivity Analysis-Elasticities Archanes - Heraklion  GDP at factor Cost

  15. Results of Sensitivity Analysis-Elasticities Archanes – Heraklion: Domestic Production Archanes – Heraklion: Producer Prices

  16. Results of Sensitivity Analysis-Elasticities Archanes – Heraklion: Factor Income

  17. Results of Sensitivity Analysis-Elasticities What did the sensitivity analysis on elasticities? • In some cases there is a change of sign but this are very limited (only in GDP and factor income) • No significant changes in terms of the magnitude of effects

  18. Results of Sensitivity Analysis-Elasticities District Bruntal  GDP at factor Cost

  19. Results of Sensitivity Analysis-Elasticities District Bruntal: Domestic Production District Bruntal: Producer Prices

  20. Results of Sensitivity Analysis-Elasticities District Bruntal: Factor Income

  21. Results of Sensitivity Analysis-Elasticities What did the sensitivity analysis on elasticities? • No significant changes in terms of sign • No significant changes in terms of the magnitude of effects

  22. Conclusions • 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.

  23. 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 elasticities • Closure rules must be suitable for the study region in order to reflex the “correct” results

  24. THANK YOU FOR YOUR ATTENTION!!!

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