Reading Shoven and Whalley: yet another practical introduction to applied general equilibrium modeling

Abstract

The aim of the “Applied General-Equilibrium Models of Taxation and International Trade: An Introduction and Survey” (Shoven & Whalley, 1984) is to show how the Walrasian General Equilibrium scheme can be converted into a powerful instrument for policy analysis through parameterization and specification of a theoretical model for numerical solution and estimation under counterfactual scenarios. Even though authors propose a numerical example along with a standard guideline for the formal development of a Computable General Equilibrium project, the formal access to the techniques remains difficult even nowadays in which availability of resources,which at the time of publishing were mediate by the higher costs– has been dramatically enhanced since then. The entrance barrier is an apprentice difficulty to match her theoretical knowledge with the empirical practice of formulation and numerical solution search. The aim of this paper is to contribute to remove such inconveniences by the reproduction of the numerical model offered by Shoven and Whalley as well as the search of a solution for the excess demand system than represents the economic relationships within the model economy. We offer a computable model in the GAMS that might be easily modified and adapted for further extensions.