Forward Looking and Myopic Regional Computable General Equilibrium Models. How Significant is the Distinction?

We present a stylized intertemporal forward-looking model able that accommodates key regional economic features, an area where the literature is not well developed. The main difference, from the standard applications, is the role of saving and its implication for the balance of payments. Though maintaining dynamic forward-looking behaviour for agents, the rate of private saving is exogenously determined and so no neoclassical financial adjustment is needed. Also, we focus on the similarities and the differences between myopic and forward-looking models, highlighting the divergences among the main adjustment equations and the resulting simulation outcomes.

The regional economic impacts of biofuels: A review of multisectoral modelling techniques and evaluation of applications

The regional economic impact of biofuel production depends upon a number of interrelated factors: the specific biofuels feedstock and production technology employed; the sector’s embeddedness to the rest of the economy, through its demand for local resources; the extent to which new activity is created. These issues can be analysed using multisectoral economic models. Some studies have used (fixed price) Input-Output (IO) and Social Accounting Matrix (SAM) modelling frameworks, whilst a nascent Computable General Equilibrium (CGE) literature has also begun to examine the regional (and national) impact of biofuel development. This paper reviews, compares and evaluates these approaches for modelling the regional economic impacts of biofuels.

How much does a single graduation cohort from further education colleges contribute to an open regional economy?

Econometric analysis has been inconclusive in determining the contribution that increased skills have on macroeconomic performance whilst conventional growth accounting approaches to the same problem rest on restrictive assumptions. We propose an alternative micro-to-macro method which combines elements of growth accounting and numerical general equilibrium modelling. The usefulness of this approach for applied education policy analysis is demonstrated by evaluating the macroeconomic impact on the Scottish economy of a single graduation cohort from further education colleges. We find the macroeconomic impact to be significant. From a policy point of view this supports a revival of interest in the conventional teaching role of education institutions.

A Theory of Wage Setting Behavior

Concerns for fairness, workers' morale and reciprocity infuence firms' wage setting policy. In this paper we formalize a theory of wage setting behavior in a simple and tractable model that explicitly considers these behavioral aspects. A worker is assumed to have reference-dependent preferences and displays loss aversion when evaluating the fairness of a wage contract. The theory establishes a wage-effort relationship that captures the worker's reference-dependent reciprocity, which in turn in uences the firm's optimal wage policy. The paper makes two key contributions: it identifies loss aversion as an explanation for a worker's asymmetric reciprocity; and it provides realistic and generalized microfoundation for downward wage rigidity. We further illustrate the implications of our theory for both wage setting and hiring behavior. Downward wage rigidity generates several implications for the outcome of the initial employment contract. The worker's reference wage, his extent of negative reciprocity and the firms expectations are key drivers of the propositions derived.