Innovations in regional computable general equilibrium (CGE) modelling

With the emergence of regional computable general equilibrium (CGE) models in the later 1980s, there was significant optimism that they would greatly push economic policy and the empirical envelopes. Unlike partial equilibrium approaches or input–output methods, CGE models can trace the impact of an economic shock or policy shock through the various sectors, allowing estimates of changes in factors, output and prices. However, many of the first generation of CGE models had a ‘black box’ feel to them. Their results could be sensitive to the functional form, parameter estimates, and assumptions about capital and labour flows. For example, in their survey article, Partridge and Rickman (1998)11. Partridge, M. D. and Rickman, D. S. 1998. Regional computable general equilibrium modeling: a survey and critical appraisal. International Regional Science Review , 21: 205–250. [CrossRef], [Web of Science ®], [CSA]
View all references called on CGE modellers to account for these problems and strive to produce more credible results. In recent years, regional CGE modellers have improved their approaches, producing innovative techniques to apply to real world problems.