Equilibrium Model Research Articles

The role of finance in production and international trade

We introduce finance in a neo-classical general equilibrium model of production and international trade to integrate the core microeconomic theory with the theory of finance. The stock of credit, as past savings, finances employment and the acquisition of machines or capital goods. The availability of finance or international financial flows does not affect production or trade patterns, except for nominal factor prices, in undistorted competitive structures. However, distortions such as unemployment, imperfect credit markets, and factor mobility do affect real outcomes and trade. Our results are consistent with contemporary empirical evidence and have policy implications for financial development and institutional quality. Numerical illustrations provide further insights.

Research on the Inhibitory Effect of the EU’s Carbon Border Adjustment Mechanism on Carbon Leakage

Associated with more ambitious targets for reducing emissions, the European Union (EU) plans to implement the Carbon Border Adjustment Mechanism (CBAM) fully in 2026, aiming to reduce carbon leakage and competitiveness concerns by imposing tariffs on carbon-intensive imports, which is expected to significantly impact its trade partners. Existing research has focused on CBAM’s impact on macroeconomic indicators but has insufficiently addressed its effects on global and regional carbon leakage, especially in non-EU countries like China. This research offers a detailed analysis of industry-specific leakage rates and integrates both global and regional impacts by employing the dynamic recursive GTAP-E general equilibrium model to numerically simulate CBAM’s inhibitory effect on carbon leakage under different carbon tariff scenarios, while also exploring the synergistic effects of anti-leakage policies in non-EU countries. Our simulations indicate the following: (1) CBAM effectively inhibits carbon leakage, with greater inhibition observed at higher tax rates and with the expansion of covered industries. (2) Establishing China’s domestic carbon market pricing can further reduce regional carbon leakage rates. Implementing global export carbon tax policies will significantly diminish the risk of global carbon leakage. (3) The implementation of CBAM is projected to reduce China’s total exports to the EU, though this loss will be partly offset by trade diversion effects. Carbon-intensive industries are more adversely affected in the short term, while all industries except fossil fuels face inevitable long-term negative impacts.

Research on the Interaction Mechanism between Farmland Circulation and Non-Agricultural Industry from the Perspective of Equilibrium

The “three rights division” is a major innovation in China’s land system. Under the framework of “three rights division”, there are corresponding policy constraints on the circulation of management rights of different types of land. This paper constructs a dynamic equilibrium model of farmland management right transfer from the macro level, and studies the economic connection between farmland circulation and non-agricultural sectors. The results show that there is an obvious economic interaction mechanism between the circulation of agricultural land and the development of regional non-agricultural industries, and circulation is a channel to communicate the flow of factors between the agricultural sector and the non-agricultural sector, and its flow trend is significantly affected by policies. There is a certain threshold for the start of agricultural land circulation, and the critical condition is that the industrial capital stock of the non-agricultural sector reaches a certain level. Therefore, to effectively promote the circulation of agricultural land, we cannot completely rely on the market, and the government’s action is crucial. Based on the analysis, this paper puts forward corresponding policy suggestions on guiding the circulation of farmland and better playing the role of circulation in promoting industrial development.

The spatial effects of innovation agglomeration on air quality in China: from the perspective of industrial development

ABSTRACT This study aims to explore the impact of innovation agglomeration on air pollution and industrial transformation within the context of China’s green development transition. We developed a general equilibrium model to theoretically explore these effects and employed an econometric analysis using panel data from 284 prefecture-level cities in China between 2005 and 2019 to empirically validate our findings. The main results are as follows: (1) Innovation agglomeration can significantly improve air quality, with a strong spatial spillover effect. (2) Innovation agglomeration can significantly promote transformation and upgrading of industrial structure, and it may also lead to the convergence of some industrial structures. Moreover, industrial structure transformation and upgrading partially mediates the relationship between innovation agglomeration and air pollution. (3) There is a nonlinear relationship between innovation agglomeration and air pollution. As industrial complementarity is developed, the effect of innovation agglomeration on air pollution enhances. These findings suggest that fostering innovation clusters and encouraging industrial diversification are key policy strategies for achieving sustainable urban development and improving environmental outcomes.

Platform integration in ride-sourcing markets with heterogeneous passengers

This paper explores the impacts of a novel business model termed platform integration, which enables passengers to simultaneously request on-demand rides from multiple ride-sourcing platforms via a third-party integrator. In particular, we employ an equilibrium model where passenger demand and driver supply are endogenously dependent on the prices and wages that emerge from the competitive interaction between two platforms, with and without an integrator. A Hotelling model is adopted to characterize passengers’ heterogeneity in service preference for different platforms. We employ the concepts of a Nash equilibrium and a shared monopoly to analyze equilibrium outcomes that can arise in various settings of demand and supply characteristics with and without platform integration. We find that how the platform should adjust its price and wage at Nash equilibrium as potential demand increases is affected by the nature of supply. We also find that the profit at Nash equilibrium can increase or decrease in supply capacity depending on the competitive situation of the platforms. We build on these equilibrium results to analyze how platform integration affects the platform’s decision-making of price and wage, and market performance. We find that platform integration can increase platform profit but reduce driver income, and may hurt passengers who have a strong preference for one certain platform, especially in the case of a less heterogeneous supply.

A Multiperiod, Multicommodity, Capacitated International Agricultural Trade Network Equilibrium Model with Applications to Ukraine in Wartime

The world is facing immense challenges because of increasing strife and the impacts of climate change with accompanying disasters, both sudden-onset as well as slow-onset ones, which have affected the trade of agricultural commodities needed for food security. In this paper, a multiperiod, multicommodity, international, agricultural trade network equilibrium model is constructed with capacity constraints on the production, transportation, and storage of agricultural commodities. The model allows for multiple routes between supply and demand country markets, different modes of transport, and storage in the producing and consuming countries as well as in the intermediate countries. The generality of the underlying functions, coupled with the capacity constraints, allow for the modeling of competition among agricultural commodities for production, transportation, and storage. The capacity constraints also enable the quantification of various disaster-related disruptions to production, transportation, and storage on the volumes of commodity flows as well as on the prices. A series of numerical examples inspired by the effects of Russia’s full-scale invasion of Ukraine on agricultural trade is presented, and the results are analyzed to provide insights into food insecurity issues caused by the war.

Pressure–temperature evolution, protolith characteristics and tectonic setting of granulite facies rocks from Laojinchang area in the Longgang Block, China

The Archean supracrustal rock series in the Laojinchang area of Jilin Province, China provide valuable insights into the Precambrian geological evolution of the North China Craton. This study presents new results on petrography, geochemistry, mineralogy, isotope geochronology and phase equilibrium modeling of the Laojinchang granulite facies metamorphic rocks. The protolith ages of garnet two-pyroxene granulite and amphibolite from Sidaolazihe Formation, and two-pyroxene granulite from Laoniugou Formation are 2565 ± 5.9 Ma, 2512 ± 17 Ma, and 2509.2 ± 8.6 Ma, respectively, with the metamorphic age recorded by amphibolite being 2475.6 ± 9 Ma. New geochemical data indicates that TTGs (tonalite-trondhjemite-granodiorite) weathering in an island arc environment formed the protolith of argillaceous gneiss of Sidaolazihe Formation. Basaltic andesite, formed under an island arc environment, was the protolith of garnet two-pyroxene granulite of Sidaolazihe Formation; while calc-alkaline basalt was the protolith of amphibolite from the same formation and two-pyroxene granulite from Laoniugou Formation. All these Archean supracrustal rocks exposed in the Laojinchang area have recorded nearly isobaric cooling (IBC) anticlockwise P-T paths with distinct prograde, peak and post-peak stages. The peak P-T conditions reached granulite facies, suggesting a heat source from underplated magmas. A tectonic model involving an island-arc setting is proposed for the evolution of these Neoarchean supracrustal rocks in Laojinchang area.

On the positive economic impacts of port infrastructure development and seaborne trade efficiencies in Sub-Saharan Africa: the case of Senegal

AbstractInefficient port infrastructures is one of the challenges facing Sub-Saharan Africa, particularly as regards the West African region’s economic progress. Using a dynamic computable general equilibrium model, the paper examines how improving port infrastructure in Senegal can increase the potential of seaborne trade, and accelerate economic and social development in the country and the wider region. Despite Senegal's strategic location along the Trans-Saharan trade route in West Africa, infrastructural limitations pose challenges to port capacity. Our findings suggest that improving port infrastructure can increase port productivity, leading to a reduction in costs of imported food products and domestic inputs. As a result, the country's competitiveness in international markets would be enhanced and could stimulate the production of cash crops, industrial food, and chemical products. This would lead to increased food supply and improved purchasing power, supporting the country's food security. Results show that increased efficiencies in maritime exports and imports lead to an overall increase in economic activity, resulting in significant GDP growth, improved welfare, and a reduction in poverty incidence. This growth can be attributed to higher exports and greater availability of imported intermediate inputs at lower prices, making exports more competitive in the global market as export prices decrease.

An equilibrium analysis of blockchain integration strategies in the livestock meat supply chain considering consumers’ preference for quality trust

PurposeThis paper aims to explore blockchain integration strategies within a three-level livestock meat supply chain in which consumers have a preference for quality trust in livestock meat products. The paper investigates three questions: First, how does consumers’ preference for quality trust affect blockchain integration and transaction decisions among supply chain participants? Second, under what circumstances will retailers choose to participate in the blockchain? Finally, how can other factors such as blockchain costs and supplier–retailer partnership value affect integration decisions?Design/methodology/approachThis paper formulates a supply chain network equilibrium model and employs the logarithmic-quadratic proximal prediction-correction method to obtain equilibrium decisions. Extensive numerical studies are conducted using a pork supply chain network to analyze the implications of blockchain integration for different supply chain participants.FindingsThe results reveal several key insights: First, suppliers’ increased blockchain integration, driven by higher quality trust preference, can negatively affect their profits, particularly, with excessive trust preferences and high blockchain costs. Second, an increase in consumers’ preference for quality trust expands the range of unit operating costs for retailers engaging in blockchain. Finally, the supplier–retailer partnership drives retailer blockchain participation, facilitating enhanced information sharing to benefit the entire supply chain.Originality/valueThis study provides original insights into blockchain integration strategies in an agricultural supply chain through the application of the supply chain network equilibrium model. The investigation of several key factors on equilibrium decisions provides important managerial implications for different supply chain participants to address consumers’ preference for quality trust and enhance overall supply chain performance.

Global Analysis of a Fractional‐Order Hepatitis B Virus Model Under Immune Response in the Presence of Cytokines

AbstractThis research proposes and investigates an epidemiological model to study the dynamic behaviors of the Hepatitis B virus (HBV) under immune response and cytokine influence. The model's stability, positivity, boundedness, and equilibria are analyzed using Lyapunov functional methods and the Routh–Hurwitz criterion under Caputo fractional derivative. The study evaluates nucleoside analogues and interferon treatments, determining critical drug efficiencies. Equilibria, including infection‐free and endemic states, are analyzed using the fundamental reproduction number, , to predict disease elimination. Numerical simulations utilize the fractional Adams method and the L1 scheme, capturing memory traces as the fractional order changes. Results show the L1 scheme effectively captures memory traces, providing empirical support for the theoretical findings. Furthermore, Ulam–Hyers stability is treated according to the equilibrium point, which describes relationships between functions. Notably, the findings of the study yielded profound insights. They revealed that the HBV system remains locally asymptotic stable at disease‐free and the endemic point when . At the same time, the simulations illustrated a correlation between the rate of infection and the rise in infected individuals, indicating the feasibility of eradicating and effectively managing HBV infections through a multifaceted approach and various measures such as vaccination and effective drug administration protocols. The proposed framework can guide medical professionals and decision‐makers in developing effective strategies to limit and eliminate the spread of HBV in the population.

Lawsonite eclogite records subduction rheology and slab detachment, Faro, Yukon-Tanana Terrane, Yukon Territory, Canada

Lawsonite eclogites represent cold subduction in the rock record, and new localities provide rare natural field laboratories to investigate deep deformation processes. We present a new lawsonite eclogite locality near Faro, Yukon Territory, Canada, the first reported lawsonite eclogite locality of the Yukon-Tanana Terrane. The discovery indicates that mid- to Late Permian subduction in the Yukon-Tanana Terrane subducted cold material in an oceanic subduction zone, in contrast to most previous models. We define a pressure-temperature-deformation (P-T-d) pathway for the lawsonite eclogites using a combination of microstructures, mineral compositional mapping, crystal orientation mapping, and phase equilibrium modeling. Metamorphism in the Faro eclogites followed a clockwise pathway through the lawsonite eclogite facies, reaching peak pressures of 22−24 MPa at 525−550 °C. Rocks then exhumed to 14.5−16 MPa during heating to 630−655 °C. Crystallographic preferred orientations (CPOs) in omphacite developed dominantly by dissolution-precipitation creep and oriented grain growth concurrently with CPOs developed in glaucophane by a combination of dislocation- and dissolution-precipitation creep with oriented grain growth. We link this fabric and CPO development in omphacite and amphibole to lawsonite dehydration, slab decoupling, and initiation of exhumation of the eclogites, providing evidence that lawsonite dehydration plays a significant role in changes in subduction zone rheology.

Income inequality, banking competition, and monetary policy

AbstractPrevious research has shown that inflation contributes to income inequality. However, in recent years, there have also been increasing concerns about the effects of concentration in the banking system on economic activity. Notably, we ask the fundamental questions: “How does the concentration of assets in the banking system contribute to the concentration of income in society? Do the effects of inflation on inequality depend on the degree of banking concentration?” We develop a general equilibrium model with heterogeneous agents and microeconomic foundations for financial intermediaries to study the effects of concentration and monetary policy. The model predicts that concentrated banks contribute to inequality by holding large amounts of liquid assets in order to raise private—but not social—returns from capital investment. As concentrated banks distort the level of investment in the economy, the adverse effects of inflation on inequality are magnified in concentrated banking systems.

What are the costs of rigidity? A general equilibrium study of the fuel market in Argentina

The policy that is most widely applied to the biofuel market in the world is the mandatory blend. This policy aims to induce the use of biofuels by setting a minimum level of biofuel per unit of blended fuel. This paper studies the costs and benefits of such a policy. To do so, a Recursive Computable General Equilibrium model (CGE), calibrated with a new own-developed energy-oriented Social Accounting Matrix of Argentina for 2018, has been developed. Such a model is extended by explicitly embedding a constrained fuel blending model into the CGE setup. This research addresses the following questions: What are the costs and benefits of a mandatory blend compared to a full flexibility scenario? Is it better to induce the use of biofuels through a tax on fossil fuels or a blending constraint? What is the impact of international price shocks when considering different blending regimes? This paper finds that the mandatory policy has a negative impact on the economic activity, poverty, income distribution, and energy affordability, but a positive one on emissions. When analysing the convenience of a special tax on fossil fuels instead of a mandatory regime, this paper finds that the cost and benefits of each policy are distributed differently over time. The special tax on fossil fuels performs better in the short run while the mandatory blend does so in the long run. Finally, this paper finds that flexibility in the fuel market improves the country's performance when there are shocks on international prices.

Environmental regulation, endowment characteristics and income inequality: A general equilibrium analysis

Environmental regulations such as the “dual carbon” target directly act on the restriction of the total amount of dirty capital to reduce carbon emissions. The change in factor endowment will have a range of effects on production and income distribution. To examine the effects of environmental regulations restricting dirty capital endowment on income distribution, this paper presents a general equilibrium model with two sectors and three factors. The unregulated clean capital-intensive sector is imperfectly competitive and features firm dynamics, using labor and clean capital as factors of production, while the regulated dirty capital-intensive sector is perfectly competitive using labor and dirty capital. We show that a decrease in the dirty capital endowment will reduce the output of the dirty capital-intensive sector and expand the clean capital-intensive sector in the long run, making society transition to green production. The tighter the restriction on the use of the dirty capital endowment is, the more firms will enter the clean capital-intensive sector, while the business-stealing effect will reduce the output of individual clean firms. We further show that the rents of both dirty and clean capital will rise while the wage of labor will fall due to the regulation. Changes in factor prices do not necessarily lead to inequality in income distributions. When the factor substitution effect in the regulated sector is large enough, clean production regulation will increase the share of labor income and decrease the share of capital income.

Synergetic studies on the influence of the integrated cellulose on the adsorption of selenite and selenite by cellulose/phillipsite composite: Steric and energetic assessments

Natural zeolite of the phillipsite phase was integrated into biocomposite with cellulose fibers (CF/Ph) and characterized as an effective and environmental adsorbent for both selenite (Se (IV)) and selenate (Se (VI)). The retention studies were performed based on the experimental factors in addition to both classic and advanced equilibrium modeling. The composite showed enhanced retention properties for both Se (IV) (196.4 mg/g) and Se (VI) (144.7 mg/g) as compared to raw phillipsite (Se (IV) (142.13 mg/g) and Se (VI) (113 mg/g)) and cellulose (Se (IV) (42.5 mg/g) and Se (VI) (6.4 mg/g)). Based on the synergetic parameters, the integration process enhanced the quantities of the existing active sites at a considerable rate (Nm = 57.3 mg/g (Se (IV)) and 48 mg/g (Se (VI))) as compared to phillipsite and cellulose. The number of the two adsorbed selenium ions is about 4, demonstrating multi-ionic uptake of them in vertical orientations. The energetic investigation (9–11 kJ/mol) validates the retention of two forms of selenium by mainly physical mechanistic processes (dipole bonding and/or van der Waals forces and/or hydrogen bonding). Regarding the thermodynamic functions, the reported behaviors demonstrate the exothermic and spontaneous uptake of both selenite (Se (IV)) and selenate (Se (VI)) by CF/Ph. Also, the composite possesses remarkable recyclability and higher efficiency as compared to several studied structures and can be applied in realistic remediation process even in existence of other chemical contaminants.

Impact of energy consumption patterns on peak emissions in China's carbon neutralisation process

The investigation of the impact of energy consumption patterns on peak emissions in China is pertinent and crucial for achieving global climate goals. The study aims to form a forecast of carbon emissions in China and diagnose the achievement of established decarbonization goals based on structural changes in primary energy consumption until 2030. To achieve the goal, the study formed a Dynamic stochastic general equilibrium (DSGE) model with the implementation of Markov chains. The obtained research results yield important insights into the influence of various scenarios on carbon emissions in China by the year 2030. Specifically, considering structural transformations, an increase in emissions by 15 % can be anticipated, which is 7 % less than predicted by the classical scenario. Among the proposed scenarios, the Net Zero scenario is deemed the most efficient, where emissions could reach a level of 8509.5 million tons of CO₂. Conversely, the New Momentum scenario proves to be the most precarious, as it entails an escalation in coal usage, leading to a 4 % increase in emissions, amounting to 13264.84 million tons of CO₂. The contribution of this study is the approach to conducting carbon emission projections, which is based on the DSGE model with the implementation of Markov chains. This makes it possible to assess the adequacy of the set targets for carbon reduction based on alternative scenarios, which in crisis conditions can overlap and thus complement each other.

Risk-averse energy dispatch for hybrid energy refueling stations considering Boundedly rational mixed user equilibrium and operational uncertainties

Nowadays, charging stations, hydrogen refueling stations, and natural gas refueling stations are being integrated into hybrid energy refueling stations (HERSs) to save investment costs and offer diverse refueling services altogether. This research proposes a risk-averse energy dispatch strategy for HERSs, incorporating bounded user rationality and operational uncertainties. A boundedly rational mixed user equilibrium model is proposed to capture the mobility of heterogeneous traffic flow, including electric vehicles (EVs), hydrogen fuel cell vehicles (HFCVs), and natural gas vehicles (NGVs), each with distinct refueling demands characterized by bounded decision-making rationality. A grid-connected HERS model integrated with carbon capture and storage and on-site renewable energy sources is designed to provide sustainable refueling services to EVs, HFCVs, and NGVs. Furthermore, an HERS operator aggregates multiple HERSs to participate in the day-ahead and real-time electricity markets. The optimal equipment operation and energy bidding strategies for the HERS operator are solved using a risk-averse approach based on conditional value-at-risk, addressing operational uncertainties from heterogeneous refueling demand, electricity markets, and renewable generation. Numerical results have validated the effectiveness of the proposed method in promoting net-zero emissions, securing economic benefits, and mitigating risks associated with operational uncertainties.

RCEMIP-II: mock-Walker simulations as phase II of the radiative–convective equilibrium model intercomparison project

Abstract. The radiative–convective equilibrium (RCE) model intercomparison project (RCEMIP) leveraged the simplicity of RCE to focus attention on moist convective processes and their interactions with radiation and circulation across a wide range of model types including cloud-resolving models (CRMs), general circulation models (GCMs), single-column models, global cloud-resolving models, and large-eddy simulations. While several robust results emerged across the spectrum of models that participated in the first phase of RCEMIP (RCEMIP-I), two points that stand out are (1) the strikingly large diversity in simulated climate states and (2) the strong imprint of convective self-aggregation on the climate state. However, the lack of consensus in the structure of self-aggregation and its response to warming is a barrier to understanding. Gaining a deeper understanding of convective aggregation and tropical climate will require reducing the degrees of freedom with which convection can vary. Therefore, we propose phase II of RCEMIP (RCEMIP-II) that utilizes a prescribed sinusoidal sea surface temperature (SST) pattern to provide a constraint on the structure of convection and move one critical step up the model hierarchy. This so-called “mock-Walker” configuration generates features that resemble observed tropical circulations. The specification of the mock-Walker protocol for RCEMIP-II is described, along with example results from one CRM and one GCM. RCEMIP-II will consist of five required simulations: three simulations with the same three mean SSTs as in RCEMIP-I but with an SST gradient and two additional simulations at one of the mean SSTs with different values of the SST gradients. We also test the sensitivity to the imposed SST gradient and the domain size. Under weak SST gradients, unforced self-aggregation emerges across the entire domain, similar to what was found in RCEMIP. As the SST gradient increases, the convective region narrows and is more confined to the warmest SSTs. At warmer mean SSTs and stronger SST gradients, low-frequency variability in the convective aggregation emerges, suggesting that simulations of at least 200 d may be needed to achieve robust equilibrium statistics in this configuration. Simulations with different domain sizes generally have similar mean statistics and convective structures, depending on the value of the SST gradient. The prescribed SST boundary condition is the only difference in the set-up between RCEMIP-II and RCEMIP-I, which enables comparison between the two; however, we also welcome participation in RCEMIP-II from models that did not participate in RCEMIP-I.

Technology and the Global Economy

Interpreting individual heterogeneity in terms of probability theory has proved powerful in connecting behavior at the individual and aggregate levels. Returning to Ricardo's focus on comparative efficiency as a basis for international trade, much recent quantitative equilibrium modeling of the global economy builds on particular probabilistic assumptions about technology. We review these assumptions and discuss how they deliver a unified framework underlying a wide range of static and dynamic equilibrium models.

On-demand mobility-as-a-Service platform assignment games with guaranteed stable outcomes

Mobility-as-a-Service (MaaS) systems are two-sided markets, with two mutually exclusive sets of agents, i.e., travelers/users and operators, forming a mobility ecosystem in which multiple operators compete or cooperate to serve customers under a governing platform provider. This study proposes a MaaS platform equilibrium model based on many-to-many assignment games incorporating both fixed-route transit services and mobility-on-demand (MOD) services. The matching problem is formulated as a convex multicommodity flow network design problem under congestion that captures the cost of accessing MOD services. The local stability conditions reflect a generalization of Wardrop's principles that include operators’ decisions. Due to the presence of congestion, the problem may result in non-stable designs, and a subsidy mechanism from the platform is proposed to guarantee local stability. A new exact solution algorithm to the matching problem is proposed based on a branch and bound framework with a Frank-Wolfe algorithm integrated with Lagrangian relaxation and subgradient optimization, which guarantees the optimality of the matching problem but not stability. A heuristic which integrates stability conditions and subsidy design is proposed, which reaches either an optimal MaaS platform equilibrium solution with global stability, or a feasible locally stable solution that may require subsidy. For the heuristic, a worst-case bound and condition for obtaining an exact solution are both identified. Two sets of reproducible numerical experiments are conducted. The first, on a toy network, verifies the model and algorithm, and illustrates the differences local and global stability. The second, on an expanded Sioux Falls network with 82 nodes and 748 links, derives generalizable insights about the model for coopetitive interdependencies between operators sharing the platform, handling congestion effects in MOD services, effects of local stability on investment impacts, and illustrating inequities that may arise under heterogeneous populations.