Computable general equilibrium（CGE）CoPSmodelling and global supply chain（GSC）analysis

Multi-regional input-output model CoPs AAKA A、AK AGIAG2KAGG G G X,.,2K B B、B、K B、,B、KB. G G1G2 G a andb are non-negative nx n matrices (i,s)(j,r) B (i,s)(j,r) are the(ij entries in a r b (i,s)(j,r) is the direct use of(i,s) per unit of output of gi, r)& Piss i r, the total requirement of (i, s to supply an extra unit of gj, r)to final users holding constant all other final demands 11

11 Multi CoPS -regional input-output model 1 1 1 11 12 1 2 2 2 21 22 1 2 K K M M M M K G G G G G G GG X X Y A A A X X Y A A * X X Y A A A                         = +                         1 1 11 12 1 2 2 21 22 1 2 K K M M M K G G G G G GG X Y B B B X Y B B * X Y B B B                   =                   Asr and Bsr are non-negative n x n matrices A(i,s)( j,r) & B(i,s)( j,r) are the (i,j)th entries in Asr & Bsr A(i,s)( j,r) is the direct use of (i,s) per unit of output of (j,r) & B(i,s)( j,r) the total requirement of (i,s) to supply an extra unit of (j,r) to final users holding constant all other final demands

Calculating how much value added from ( CoPs each country is embodied in ss exports Exports from s tor: E=A*X+Y for str Required output vector from country g to produce these exports: be Required value added from country q to produce these exports: Vo Boe Value added from all countries in exports from S (evA) EVA,=∑∑VBE EVA、=∑VBE+∑∑VBE r≠s The first term on the rhs is s's own contribution to value added in its exports (known as domestic value added, DVs. The second term is foreign value aded(FⅤ)

12 CoPS Calculating how much value added from each country is embodied in s’s exports Exports from s to r: E A * X Y for s r sr sr r sr = +  Required output vector from country q to produce these exports: B Eqs sr Required value added from country q to produce these exports: V B E q qs sr Value added from all countries in exports from s (EVAs ):    =     s q qs sr   q r s EVA V B E      = +     s s ss sr q qs sr    r s q s r s EVA V B E V B E The first term on the RHS is s’s own contribution to value added in its exports (known as domestic value added, DVs ). The second term is foreign value added (FVs )

How much value added does CoP country s really export? EVA= DV Fv EVA ∑ VB E +∑∑VBE r≠s r≠s EVA,=∑VB、(An*X,+Yy) ⅤB_E q qs EVA、=V∑∑B+∑BYn+VΣBAX+∑∑VBE ≠s(r≠s Exports VA from s,VA exported Ⅴ A exported Foreign from s,=absorbed+ from s, and+ from s, and VA in VA outside s returned in returned in exports content final goods) interm goods from s Koopman, R, Z. Wang and s-j. Wei (2014), "tracing value added and double 13 counting in gross exports", American Economic Review, 104(2), 459-94

13 How much value added does CoPS country s really export?      = +     s s ss sr q qs sr    r s q s r s EVA V B E V B E      = + +     s s ss sr r sr q qs sr    r s q s r s EVA V B (A * X Y ) V B E        = + + +     s s sg gr s sr rs s sr rs s q qs sr      r s g r s r s q s r s EVA V B Y V B Y V B A X V B E M Koopman, R., Z. Wang and S-J. Wei (2014), “Tracing value added and double counting in gross exports”, American Economic Review, 104(2), 459-94. EVA DV FV s s s = + Exports from s, VA content VA from s, absorbed outside s VA exported from s, and returned in final goods VA exported from s, and returned in interm goods Foreign VA in exports from s = + + +

Relating fob exports to VA content of exports: oPs tariff correction 0 (P(),P(S)=(P(s),P(s) k26y/+(P(s,P(S) A21(s)20 +(V(,V() where t12 and t2l are diagonal matrices of tariff rates(not powers) and s denotes scenario(explained later) (,P(,o)( B1(s)B2(s) B21(s)B2(s) +(P(s),P(s) A,2 (s)12 Bu, (s) B,2(s) A,(s)τ210 B21(s)B2(S) Now we obtain the fob value of exports by multiplying by E1 and E2 where these the export vectors for the two countries (P(),P(S) E(s)0 ((),v2() B, (s) B,(s)E(S)0 0E2(s B2(s)B2(s)人0E2(S) +(P(S),P2(s 0 A,2(s)2(B, (s)B2(S)E, (S)0 A2(S)20 B2(s)B2(s)人0E2() The first term on the right hand side gives the value added content (Evas)of exports from each country. The second term is the discrepancy between fob exports and value added content of exports caused by tariffs on each countrys imports of intermediate inputs that are subsequently embedded in exports

14 Relating fob exports to VA content of exports: CoPS tariff correction ( ) ( ) ( ) ( ) 11 12 12 12 1 2 1 2 1 2 1 2 21 22 21 21 0 0 A (s) A (s) A (s) P (s) , P (s) P (s) , P (s) P (s) , P (s) V (s) , V (s) A (s) A (s) A (s)      = + +          where 12 and 21 are diagonal matrices of tariff rates (not powers) and s denotes scenario (explained later) ( ) ( ) ( ) 11 12 12 12 11 12 1 2 1 2 1 2 21 22 21 21 21 22 0 0 B (s) B (s) A (s) B (s) B (s) P (s) , P (s) V (s) , V (s) P (s) , P (s) B (s) B (s) A (s) B (s) B (s)       = +            Now we obtain the fob value of exports by multiplying by E1 and E2 where these the export vectors for the two countries ( ) ( ) ( ) 1 11 12 1 1 2 1 2 2 21 22 2 12 12 11 12 1 1 2 21 21 21 22 2 0 0 0 0 0 0 0 0 E (s) B (s) B (s) E (s) P (s) , P (s) V (s) , V (s) E (s) B (s) B (s) E (s) A (s) B (s) B (s) E (s) P (s) , P (s) A (s) B (s) B (s) E (s)           =           +          The first term on the right hand side gives the value added content (EVAs) of exports from each country. The second term is the discrepancy between fob exports and value added content of exports caused by tariffs on each country’s imports of intermediate inputs that are subsequently embedded in exports

2. CGE modelling CoP What makes a Cge model: defining features Computable: real world data General: explicit agents with optimizing behaviour Equilibrium: price determination through the interaction of demand and supply for commodities and factors(introduces resource constraints Popular -15,000 practitioners from 150 countries in the GTAP network Versatile the effects on macro, welfare, industry, regional, labour-market distributional and environmental variables taxes, public consumption and social security payments; tariffs and other interferences in international trade: environmental policies; technology; international commodity prices; interest rates; wage setting arrangements and union behaviour mineral discovories(the Dutch disease); immigration; micro economic reform; and major projects 15

15 CoPS 2. CGE modelling Popular - 15,000 practitioners from 150 countries in the GTAP network Versatile - the effects on macro, welfare, industry, regional, labour-market, distributional and environmental variables of taxes, public consumption and social security payments; tariffs and other interferences in international trade; environmental policies; technology; international commodity prices; interest rates; wage setting arrangements and union behaviour; mineral discovories(the Dutch disease); immigration; micro￾economic reform; and major projects What makes a CGE model: defining features ➢ Computable: real world data ➢ General: explicit agents with optimizing behaviour ➢ Equilibrium: price determination through the interaction of demand and supply for commodities and factors (introduces resource constraints)