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An Economic General Equilibrium Model for Evaluation of Production Support Policies in Developing Countries

Haqiqi, Iman and Bahalou, Marziyeh and Shamsaee, Arezoo (2017): An Economic General Equilibrium Model for Evaluation of Production Support Policies in Developing Countries.

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Abstract

This paper introduces a Computable General Equilibrium (CGE) model for the evaluation of production support policies in developing countries. It is a multi-sector, multi-market, multi-household model appropriate for what-if policy analysis. We describe the main aspects of the model. The model assumes small open economy, imperfect capital mobility, imperfect substitution between imported and domestic commodity, nested CES structure in production, nested CES structure in consumption, and heterogeneity of domestic products in one category. We consider transport margin, wholesale margin, import tariffs, import subsidy, production tax, value added tax, goods and services tax, and other transfer payments. We calibrate the model based on the 2001 Micro Consistent Matrix of Iran. The initial validation tests approve the validity of the model.

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