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Assessment of Rural Development Policies Impacts Using a Bi-Regional CGE Model

This workshop presentation by Eudokia Balamou at the University of Patras focused on the application of a bi-regional Computable General Equilibrium (CGE) model, RURMOD-E, to evaluate the effects of rural development policies. Emphasizing sensitivity analysis, the study explored the implications of varying elasticity parameters and closure rules on simulation results. Key findings indicated that while significant quantitative effects were noted, qualitative changes in the direction of impacts remained limited. The conclusion stressed the importance of carefully selecting closure rules and elasticities relevant to the specific study region.

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Assessment of Rural Development Policies Impacts Using a Bi-Regional CGE Model

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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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