Multi-sector Model Research Articles

Granular Comparative Advantage

Large firms play a pivotal role in international trade, shaping the export patterns of countries. We propose and quantify a granular multi-sector model of trade, which combines fundamental comparative advantage across sectors with granular comparative advantage embodied in outstanding individual firms. We develop an SMM-based estimation procedure, which takes full account of the general equilibrium of the model, to jointly estimate these fundamental and granular forces using French micro-data with information on firm domestic and export sales across manufacturing industries. We find that granularity accounts for about 20% of the variation in realized export intensity across sectors, and is more pronounced in the most export-intensive sectors. In turn, idiosyncratic firm dynamics accounts for a large share of the evolution of a country's comparative advantage over time. Governments face strong incentives to target trade policy at large individual foreign exporters, and to use lenient antitrust regulation at home to substitute for beggar-thy-neighbor trade policy.

A parameter-free population-dynamical approach to health workforce supply forecasting in EU countries

Abstract Many countries face challenges like impending retirement waves, negative population growth, or a suboptimal distribution of resources across medical sectors and fields in supplying their healthcare systems with adequate staffing. An increasing number of countries therefore employs quantitative approaches in health workforce supply forecasting. However, these models are often of limited usability as they either require extensive individual-level data or become too simplistic to capture key demographic or epidemiological factors. We propose a novel population-dynamical and stock-flow-consistent approach to health workforce supply forecasting complex enough to address dynamically changing behaviors while requiring only publicly available timeseries data for complete calibration. We apply the model to 21 European countries to forecast the supply of generalist and specialist physicians until 2040. Compared to staffing levels required to keep the physician density constant at 2016 levels, in many countries we find a significant trend toward decreasing density for generalist physicians at the expense of increasing densities for specialists. These trends are exacerbated in many Southern and Eastern European countries by expectations of negative population growth. For the example of Austria, we generalize our approach to a multi-professional, multi-regional and multi-sectoral model and find a suboptimal distribution in the supply of contracted versus non-contracted physicians. It is of the utmost importance to devise tools for decision makers to influence the allocation and supply of physicians across fields and sectors to combat imbalances. Key messages The trend of increasing supply of physicians continues in most European countries—stronger for specialists than for general physicians. To avoid potential physician shortages, in particular in primary care, we need to combat imbalances of physicians across sectors and medical fields.

Exhaustible Resources and Classical Theory

Smith, Ricardo, Marx and Sraffa made no theoretical distinction between exhaustible resources and lands. The very notion of exhaustibility, however, can be opposed to that of “indestructible powers of the soil” (Ricardo) and calls for a specific analysis distinct from that of rent. The diversity of the contemporary attempts to deal with that question in a Classical framework shows how varied are the understandings of the main methodological features of Classical theory. Three crucial points emerge: first, the treatment of prices, which are invariant in classical theory but, according to the Hotelling rule, are changing through time for exhaustible resources; second, the notion and the measure of the rate of profits; and, third, the relationship between economic analysis and a more historical and sociological approach stressing the balances of power between classes. Our own approach starts from a very simple model, called the corn-guano model, where guano is the exhaustible resource, and examines the dynamics of such an economy on the physical side and the value side. These lessons serve as a basis for an extension to multisector models. We provide a critical assessment of a few alternative approaches developed by Sraffian scholars.

The COVID-19 multiplier effects of tourism on the Greek economy

Using a multisectoral model and data from the Supply and Use Tables, this article estimates the COVID-19 multiplier effects of tourism on gross domestic product (GDP), total employment, and trade balance of the Greek economy. The results indicate that a—not-unexpected—decrease of international travel receipts in the range of 3.5 to 10.5 billion euros would lead to a decrease in GDP of about 2.0% to 6.0%, a decrease in the levels of employment of about 2.1% to 6.4% and an increase in the trade balance deficit of about 2.4 to 7.1 billion euros, respectively.

Production network structure, service share, and aggregate volatility

This paper shows that GDP growth volatility declines with production network diversification. To account for this evidence, I build a multisector model with CES technologies and a cost of complexity in the bundle of intermediates. Production network diversification decreases volatility when intermediate inputs and labor are substitute inputs. U.S. sectoral data suggest that labor and intermediates are substitutes in service sectors. Therefore, a calibrated model that then also matches each country's production network can quantitatively generate the empirical patterns. The model also explains why service-oriented countries are less volatile: service sectors have a more diversified set of suppliers.

START-UP OR SCALE-UP?: An Approach through Economic Impact

Entrepreneurship is considered to be one of the engines for transforming our world and overcoming the diverse nature of global challenges as it promotes sustained, inclusive, and sustainable economic growth, higher levels of productivity, technological innovation, full and productive employment, and decent work for all peoples (United Nations, n.d.). Over the last decade, however, this belief has been shown to be flawed given that the typical start-up is not innovative, creates only a few jobs, and generates little wealth. Policy makers are increasingly focusing as such on the so-called scale-ups, or start-ups that have experienced growth of more than 20% over the last three consecutive years. The general belief is that these companies have a big impact on the economy, especially in terms of job creation. The purpose of this paper, then, is to test whether public resources should continue to be devoted to the generation of new companies or if these should be oriented toward the promotion of high growth companies that are defined as scale-ups. To accomplish this task, we developed a multisector model based on Social Accounting Matrices (SAM) to measure this impact of start-ups and scale-ups and applied it to a regional economy (Andalusia). The results obtained suggest that while scale-ups have a greater impact on gross domestic product, productive output, and job creation compared to traditional entrepreneurial activity, this is not large enough to replace the latter.

The regional economic impacts of offshore wind energy developments in Scotland

Abstract The Scottish electricity network is currently in a transition towards becoming 100% renewable. Offshore wind, due to a large natural resource, is expected to be key in this transition. In addition to the anticipated environmental benefits, increasing the share of offshore wind is expected to bring economic benefits to the region. In this study two multi-sectoral modelling methodologies – Input-Output (IO) and Computable General Equilibrium (CGE) – are used to measure the potential economic impacts on Scotland arising from both the construction and operation of the planned increase offshore wind capacity between 2018 and 2025, with comparisons made between models and development stages. With the focus on the benefits to the Scottish economy it is important to focus only on expenditures within Scotland. Found using both IO and (forward-looking and myopic) CGE modelling techniques, is increasing offshore wind capacity raises both employment and Gross Value Added (GVA) with the magnitude and timing of this change critically depend on model type and closure. This is the first – to the author’s knowledge – of a Scottish specific modelling which helps policy makers understand those elements which could affect the possible economic success of current policy towards offshore wind.

Industrial specialization matters: A new angle on equity home Bias

This paper theoretically and empirically examines how industrial structure affects international portfolio diversification. I embed portfolio choice in a multi-country, multi-sector model in order to explore how sectoral productivity differences affect a country's risk exposure and hence influence home bias. The model predicts that investors from highly specialized economies who want to hedge their risk have a strong incentive to avoid domestic assets. I confirm the prediction with the data by finding that home bias is negatively correlated with a country's degree of industrial specialization. This finding unveils the interaction between intranational risk hedging across sectors and international risk hedging across countries.

Structural change and cumulative causation: A Kaldorian approach

AbstractThis paper presents a multisectoral model based on Kaldor's approach to explain the importance of structural change and cumulative causation. Divergence in countries' growth rates in Kaldorian models are explained either by different degrees of increasing returns among sectors on the supply side or by different income elasticities of exports and imports on the demand‐side, but it is not explained by both factors together. In this vein, a multisector growth model that combines different sectoral income elasticities and different sectoral increasing returns is built to explain how structural changes toward high‐tech industries can trigger a process of cumulative causation and ensure higher growth rates in the long run.

Mathematical Modeling of Optimal Measures to Counter Economic Sanctions

The paper considers the problems of developing recommendations in the area of fiscal and trade policies to counter economic sanctions at the level of both individual countries subject to such sanctions and at the level of economic union including such countries. Research study has been carried out based on the developed dynamic multi-sectoral and multi-country computable general equilibrium model, which describes the functioning of the economies of nine regions of the planet, including five countries of the Eurasian Economic Union (EAEU). The initial data of the model contain built sets of consistent social account matrices (SAMs) for the historical and forecast periods based on data from the Global Trade Analysis Project (GTAP) database, national input-output tables, international trade and IMF data (including forecast) for the main macroeconomic regions indicators. Results of the impact on macroeconomic and sectoral indicators of the EAEU countries and other regions of a hypothetical scenario providing the imposition of additional economic sanctions since 2019 against Russia from some regions were obtained. An approach to solving problems to counter the sanctions policy based on the parametric control theory by setting and solving a number of dynamic optimization problems to determine optimal values of the corresponding fiscal and trade policy instruments at the level of individual EAEU countries and the EAEU as a whole was proposed.
 The results of the model-based calculations were tested for the possibility of practical application using three approaches, including evaluation mappings’ stability of the exogenous parameters’ values of a calibrated model to the values of its endogenous variables. The results demonstrate greater efficiency for each EAEU country using a coordinated economic policy to counter sanctions, compared with the implementation of such policy separately at the level of each country.

Health Shocks in a General Equilibrium Model

This paper presents a dynamic general equilibrium model with a health shock in a multi-sector model The health shock leads to a reduction in (i) labor supply i

African Access Initiative: A holistic, multi-sector approach to mitigating Africa’s cancer crisis.

e19015 Background: In a dramatic reversal of trends, cancer now kills more Africans each year than malaria. Should trends continue, Africa’s cancer burden is projected to double to over 2 million new cases and over 1.4 million deaths annually by 2040. Africa’s burgeoning cancer crisis is attributable to many factors, including insufficient preventive, diagnostic, and treatment services; inadequate clinical infrastructure; and shortages of trained healthcare personnel. Methods: BVGH launched the African Access Initiative (AAI) in 2017 to address Africa’s cancer crisis. Utilizing a holistic approach that establishes sustainable access to cancer medicines, strengthens healthcare infrastructure, and builds clinical oncology capacity, BVGH is eliminating or minimizing many of the challenges African clinicians face when diagnosing and treating cancer patients. Complementing its innovative approach, BVGH engages experts across sectors to build capacity and execute programs. African ministries of health and cancer leaders are engaged to ensure AAI activities are driven by their priorities and needs. AAI is not a donation-based program. Pharmaceutical companies are engaged to ensure access to quality, lifesaving cancer drugs in a sustainable and patient-focused manner. International cancer experts are enlisted in capacity building programs that directly align with their expertise and meet their global oncology goals. Results: BVGH is applying its multi-faceted, multi-sector model in Cameroon, Côte d'Ivoire, Kenya, Nigeria, Rwanda, and Senegal. In partnership with Nigeria’s Ministry of Health, BVGH held a cancer stakeholder meeting to define the country’s priority cancers, drugs, and treatment regimens. Following the meeting, BVGH launched an RFP to pharmaceutical companies and subsequently developed reports that forecast full treatment costs based on the companies’ offerings of deeply-discounted drug prices. While simultaneously coordinating drug access, BVGH began planning training refreshers to ensure recipient Nigerian hospitals were ready to use the prioritized cancer drugs successfully. Beyond Nigeria, BVGH has improved Rwanda’s ability to diagnose cancer efficiently; improved Côte d'Ivoire’s multidisciplinary approach to diagnosing and treating cancer patients; and helped Kenya refine its cancer patient sample referral mechanisms. Conclusions: This presentation will describe BVGH’s holistic, multi-sector approach to addressing Africa’s cancer crisis, including partners, activities, lessons learned, and best practices.

The potential of sector coupling in future European energy systems: Soft linking between the Dispa-SET and JRC-EU-TIMES models

The relevance of sector coupling is increasing when shifting from the current highly centralised and mainly fossil fuel-based energy system to a more decentralized and renewable energy system. Cross-sectoral linkages are already recognized as a cost-effective decarbonisation strategy that provides significant flexibility to the system. Modelling such cross-sectoral interconnections is thus highly relevant. In this work, these interactions are considered in a long-term perspective by uni-directional soft-linking of two models: JRC-EU-TIMES, a long term planning multisectoral model, and Dispa-SET, a unit commitment and optimal dispatch model covering multiple energy sectors such as power, heating & cooling, transportation etc. The impact of sector coupling in future Europe-wide energy systems with high shares of renewables is evaluated through five scenarios. Results show that the contributions of individual sectors are quite diverse. The transport sector provides the highest flexibility potential in terms of power curtailment, load shedding, congestion in the interconnection lines and resulting greenhouse gas emissions reduction. Nevertheless, allowing combinations of multiple flexibility options such as hydro for the long-term, electric vehicles and flexible thermal units for the short-term provides the best solution in terms of system adequacy, greenhouse gas emissions and operational costs.

Sectoral Price Stickiness and Inflation Persistence in Poland: A Two-Sector DSGE Approach

This paper presents a theoretical model that is suitable for the analysis of price-setting hetero-geneity in a small open economy. The model is based on Benigno and Lopez-Salido's (2006) work and is one of many examples of a dynamic stochastic general equilibrium (DSGE) model that utilizes heterogeneous price stickiness (e.g., Aoki, 2001; Bodenstein et al., 2008). The model allows analyses of a small open economy by extending the existing multisector models using the mechanisms described by Gali and Monacelli (2005). As a result, the model enables monetary policy analyses that take into account existing sectoral differences in the price-setting mechanisms found in an open economy. In the empirical part of the paper, the model is estimated on data for Poland using Bayesian techniques. The results show that the period 1999-2017 saw significant differences in price stickiness and inflation persistence in the sectors that produce food and energy compared with sectors that produce other goods and services.

Can Shiozawa’s, Morioka’s and Taniuchi’s Microfoundations for Evolutionary Economics (2019) Serve As the Microfoundations for “… Post-Keynesian Economics “ (2019, p.vii)? The Answer Is Definitely Yes if Post –Keynesians Can Break Away From Joan Robinson’s Anti-Mathematical, Anti-Formalist Views

Can Shiozawa’s, Morioka’s and Taniuchi’s Microfoundations for Evolutionary Economics (2019) Serve As the Microfoundations for “… Post-Keynesian Economics “ (2019, p.vii)? The Answer Is Definitely Yes if Post –Keynesians Can Break Away From Joan Robinson’s Anti-Mathematical, Anti-Formalist Views

The effect of education on determinants of climate change risks

Increased educational attainment is a sustainable development priority and has been posited to have benefits for other social and environmental issues, including climate change. However, links between education and climate change risks can involve both synergies and trade-offs, and the balance of these effects remains ambiguous. Increases in educational attainment could lead to faster economic growth and therefore higher emissions, more climate change and higher risks. At the same time, improved attainment would be associated with faster fertility decline in many countries, slower population growth and therefore lower emissions, and would also be likely to reduce vulnerability to climate impacts. We employ a multiregion, multisector model of the world economy, driven with country-specific projections of future population by level of education, to test the net effect of education on emissions and on the Human Development Index (HDI), an indicator that correlates with adaptive capacity to climate impacts. We find that improved educational attainment is associated with a modest net increase in emissions but substantial improvement in the HDI values in developing country regions. Avoiding stalled progress in educational attainment and achieving gains at least consistent with historical trends is especially important in reducing future vulnerability. The effect of education on climate change risks is integral to the relation between climate and development, but difficult to quantify. This article finds potential increases in emissions as well as HDI values due to improved educational attainment in developing countries.

Análisis del efecto de la crisis en la contratación laboral por grupos de ocupación en Andalucía

The aim of this paper is to analyze the effects of the current economic crisis on the labor market structure of Andalusia, using a multisectoral model. This is a study of the labor market in terms of industry and occupational groups, determining their evolution, both aggregate and sectoral, in Andalusia, due to economic growth or recession. It presents the contracts as a proxy for job creation, analyzing the relationship between exogenous shocks in sectors of activity and generation of employment contracts, and their distribution among the major occupational groups. The main analysis tool for achieving this goal is the use of a Social Accounting Matrix for Andalusia (2005), applying linear multiplier analysis and extending the study of occupations and contracts.

Social Distancing and Supply Disruptions in a Pandemic

Drastic public health measures such as social distancing or lockdowns can reduce the loss of human life by keeping the number of infected individuals from exceeding the capacity of the health care system but are often criticized because of the social and the economic cost they entail. We question this view by combining an epidemiological model, calibrated to capture the spread of the COVID-19 virus, with a multisector model, designed to capture key characteristics of the U.S. Input Output Tables. Our two-sector model features a core sector that produces intermediate inputs not easily replaced by inputs from the other sector, subject to minimum-scale requirements. We show that, by affecting workers in this core sector, the high peak of an infection not mitigated by social distancing may cause very large upfront economic costs in terms of output, consumption and investment. Social distancing measures can reduce these costs, especially if skewed towards non-core industries and occupations with tasks that can be performed from home, helping to smooth the surge in infections among workers in the core sector.

Exploiting separability in a multisectoral model of oligopolistic competition

The paper uses the most general version of a Dixit–Stiglitz economy and the concept of oligopolistic equilibrium, defined in previous work, with firms maximizing profits in prices and quantities under a market share and a market size constraint. The purpose here is to take even more advantage of separability so as to partition the oligopolistic sector into groups. Weak separability simplifies quantity conjectures and homothetic separability simplifies price conjectures. Oligopolistic equilibria can in addition be approximated by introducing group expenditure conjectures. Finally, the way different groups interact within the same industry is illustrated within the same framework.

Conditions for linearity of the wage curve

AbstractFor a given technique, the wage‐rate of profit curve is linear in one‐sector models. In multisector models, Wicksell effects appear and some paradoxes in capital theory are linked to the complex shape of the wage curve. We study the conditions ensuring the linearity of the curve for a bisector model and for models satisfying a specific rank condition.