Structure Overview 1 1

Structure overview (1.1) #

In a nutshell, MIRAGE-e is a multi-sector multi-country CGE model with the following assumptions:

  • A representative agent, which gathers both consumers and the government, maximises a LES-CES utility function. See the page dedicated to final demand.
  • A representative firm by sector maximizes its profit function under the production function described in the supply side page, under perfect competition.
  • Aggregated demand for each good follows an Armington-like demand function, as described in the demand side page.
  • CO2 emissions are computed with sector-specific emission factors.
  • Non-tariff measures can be introduced, and modelled as an iceberg cost or a rent-creating trade cost (allocated to exporter or importer)

Along with these core assumptions, and under some aggregation constraints, the model can represent better the use and production of energy:

  • The representative firm mainly substitutes energy with value-added components, as described in the supply side page.
  • Every firm’s energy consumption is subject to time varying energy productivity.
  • Energy-producting firms have slightly different production function

A more detailed overview of the model and its baseline is available here{.align-center}

Data #

MIRAGE-e mainly relies on GTAP data, but also depends on several sources.

GTAP data #

MIRAGE relies for SAMs on the GTAP database which currently provides data for 140 regions and 57 sectors. The model cannot run at this level of detail on a personal computer due to computation resource requirements and requires aggregation in a number of around 25 regions and 25 sectors.

GTAP also represents a strong network for research on global trade modelling. The GTAP official website constitutes an important source of information for CGE modellers.

Protection data #

Data on protection are particularly sensitive for in trade policy assessment. For simulations done with MIRAGE, we do not use GTAP aggregated tariff but compute our own tariff equivalents thanks to the database MAcMap-HS6 developed at CEPII and that represents bilateral applied tariffs for 5,113 products in the HS6 nomenclature. The tariff aggregation is done through the use of reference groups.

See section: MAcMap database

Non-tariff measures #

MIRAGE-e is able to take non-tariff measures into account. It relies on the following data:

  • Trade frictions are measured as the ad-valorem equivalent for time spent un customs, provided by ImpactEcon.
  • Ad-valorem equivalents for NTMs in services are built at CEPII [(:harvard:Font2016)]
  • Ad-valorem equivalents for NTMs in goods are taken from [(:harvard:Kee2009)]

Baseline #

MIRAGE-e baseline is built using the EconMap database. It is used to calibrate the baseline trajectory of:

  • Total factor productivity
  • Population by education level
  • Savings rate and current account
  • Energy efficiency

See section: baseline_1.1

Core features #

Supply and Demand #

The strength of the CGE framework is its foundation on microeconomic equations that represent the behaviour of agents in a consistent neo-classical framework. In MIRAGE, a representative agent is maximising its utility relatively to the perceived set of prices, and the demand in countries is complemented by investment demand under budget constraint and firms maximising their profit. The supply and demand of countries are entangled through international trade relations which make them interdependent.

See sections:

Production factors #

The representation of factor markets is also crucial to determine the mobility of production factors across countries and sectors, as well as their availability. There are in MIRAGE three type of factors common to all productive sectors: capital, skilled labour and unskilled labour. Additionally, primary sectors are also dependant on land (agriculture) and natural resources (for mining, forestry and fishing sectors).

See sections:

Energy-oriented features #

MIRAGE-e has several energy-oriented features:

  • Energy efficiency
  • Accounting in energy units
  • CO2 emissions

Detailed overview #