NETHERLANDS INSTITUTE Empirics in the New Economic Geography: Spatial Computable General Equilibrium simulations using GAMS Mark Thissen Lecture 3: 14.00 - 16.00 July 4, 2007 Dimetic workshop Pécs, Hungary Region 1 Region 2 Region 3 NETHERLANDS INSTITUTE FOR SPATIAL RESEARCH

Contents Developing a “simple” model with two sectors and three regions. Applying it in GAMS Calibration of the model Doing Policy experiments

Model 1: Production (1)

Model 2: Production and agglomeration economies (1) (2)

Model 3: Small regions CGE’s (1) (2) (3) (4)

Model 4: Small regions CGE’s with sector labour demand (1) (2) (3) (4) (5) (6)

Model 5: Small regional CGE with labour migration (1) (5) (2) (6) (3) (4) (7) (8) (9)

Model 6: Interregional trade CGE model (1) (2) (10) (11) (14) (12) (13) (15)

Model 6: Calibration: How does the interregional economy look like?

Model 7: Interregional trade CGE model (Model 6) with the following additional equations (8) (9) (16)

Model 8: Endogenous transport costs depending on trade flows Region 1 Region 2 Region 3 Within regions: within region flow From and to region 2: also the passing flows From and to regions 1 or 3: Also half of the flow from and to region 2

Exercise The government has the plan to increase road capacity between from region 1 to 2. The government wants to know the maximum it should spend on road construction. Set up a plan how to analyze this question. Answer the question using model 7 or 8