Computational Aspects of General Equilibrium Theory

Abstract

This thesis studies three different issues in the field of General Equilibrium theory: Computable General Equilibrium modelling, Input-Output Analysis and Consumer theory.Computable General Equilibrium modelling is addressed by implementing a SAMbased CGE model for the Indirect Transportations Costs present in the border crossing for the U.S.-Mexico bilateral trade. Here, an "iceberg-type" transportation function is assumed to determine the amount of loss that must be faced as a result of border crossing process through the ports of entry existing between the two countries. The study period covers annual data from 1995 to 2009 allowing the analysis of the trend of these costs considering the trade liberalisation that is experienced. Results show that the ITC have experienced a decrease of 12% during the period.Input-Output Analysis is applied through four different methodologies to assess the Mexican productive structure: Chenery-Watanabe direct linkages method, Rasmussen's total linkages approach, Streit's coefficients approach and the Non-Hypothetical Extraction Method. This is done aiming to capture distinct aspects of the economic intersectoral relationships. The study period covers from 1995 to 2009 using Input-Output Tables, with a level of disaggregation of 35 economic sectors. Thus, through the methodologies implemented is possible to detect changes in the productive structure both excluding the external sector and due to trade liberalisation that was experimented by the Mexican economy. The overall conclusion is that the Mexican productive structure experienced changes leading a substitution of domestic goods by foreign goods.Finally, Consumer Theory is analysed by testing the Generalized Axiom of Revealed Preference (GARP) in an empirical study with two different datasets. On the one hand, the empirical application of this concept is explored using a Non-parametric test to U.S. aggregate consumption per capita data from 1929-2009. This is done in order to determine consumption bundles and consumer behaviour altogether. On the other hand, a microeconomic approach is applied using data on weekly household food grocery purchases along two years. This analysis identifies the consumer behaviour over time and determines how prone they are to comply or violate the GARP. Thereby, in both cases leads to the general conclusion that the axiom violations occur as a result of significant variations in the price level.i