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Equilibrium Models in an Applied Framework pp 109–117Cite as

Back to the CGE Mini Model

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Part of the book series: Lecture Notes in Economics and Mathematical Systems ((LNE,volume 667))

Abstract

This chapter, a continuation of Chap. 5, uses the ideas of endogenous obsolescence from Chap. 6 and adapts them to the CGE mini model. In this chapter the feature of endogenous obsolescence is included in the equation representing depreciation expenditure. In that sense, the endogenous transformation process is introduced in the CGE mini-model. In short, the focus of this chapter is to provide examples of structural transformation in an open economy. Thus, the model specification is here, as in Chap. 5, that the total investment equation is determined by total saving, and the allocation to the different industry sectors are influenced by the sector specific rate of return, but now also in terms of endogenous obsolescence.

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Notes

  1. 1.

    The literature on endogenous disinvestment is rare, but see Abel (1981), and Epstein and Denny (1980).

  2. 2.

    Readers familiar to the CGE mini-model will here notice the fall in the capital stock in services.

  3. 3.

    See also Benjamin (1990).

  4. 4.

    A review of the literature on business fixed investment spending, and assesses of the current state of knowledge and future agenda, is presented by Chirinko (1992).

References

  • Abel A (1981) Taxes, inflation, and the durability of capital. J Polit Econ 89:548–560

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  • Benjamin N (1990) Devaluations and credibility in structural adjustment policy. J Policy Model 12(4):659–669

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  • Chirinko RS (1992) Business fixed investment spending: a critic survey of modelling strategies, empirical results, and policy implications, vol 27, Working paper series. Center for Economic Studies, University of Munich, Munich

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  • Epstein Larry G, Denny Michael GS (1980) Endogenous capital utilization in a short-run production model. J Econ 12:189–207

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Author information

Authors and Affiliations

  1. Department of Social Sciences, Mid Sweden University, Östersund, Sweden

    Dr. Ronny Norén

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  1. Dr. Ronny Norén
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© 2013 Springer-Verlag Berlin Heidelberg

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Norén, R. (2013). Back to the CGE Mini Model. In: Equilibrium Models in an Applied Framework. Lecture Notes in Economics and Mathematical Systems, vol 667. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-642-34994-2_7

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  • DOI: https://doi.org/10.1007/978-3-642-34994-2_7

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  • Publisher Name: Springer, Berlin, Heidelberg

  • Print ISBN: 978-3-642-34993-5

  • Online ISBN: 978-3-642-34994-2

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