General equilibrium modelling in South Africa: What the future holds

Abstract

This paper provides an overview of the main research contributions of the past decade using general equilibrium models to analyse agricultural issues in South Africa. The methodological developments since the change to democracy ten years ago are viewed in the context of developments in this area of research carried out internationally. It will be shown in this paper that the modelling and computing techniques have vastly improved during the past decade, both in an ongoing attempt to refine existing models, and in an attempt to extend the modelling framework to make provision for issues that cannot be sufficiently captured in the standard comparative static models. These extensions include dynamic modelling, global modelling, environmental modelling and micro simulation. The paper highlights the non-trivial data requirements of this type of modelling. The national statistical agency, Statistics South Africa, supports general equilibrium modellers by their development of input-output tables, social accounting matrices and, more recently, supply and use tables. This decade has therefore witnessed an improvement in the data for the construction of national level social accounting matrices. Requirements for provincial level data have however not been met sufficiently, posing huge challenges for provincial and regional modelling. The lack of primary data has however stimulated development of advanced data estimation techniques that can be applied to overcome this data challenge. Application of general equilibrium techniques to analyse agricultural issues in South Africa still remains limited and substantial support and training of researcher is still needed to expand domestic capacity in this field of research.

Liberalising Trade in South Africa: A Survey of Computable General Equilibrium Studies

“…Van Schoor and Burrows (2003) have extended the IFPRI CGE model to incorporate imperfect competition and returns to scale. As observed by McDonald and Punt (2005), this work is important because it demonstrates the feasibility of using CGE models for undertaking market structure analysis and for competition policy analysis. However, the empirical application was hampered by lack of data.…”

“…The model has been used to analyse trade liberalisation effects (Chant et al. 2001), implications of fuel price increases, technology change and increases in the wheat import tariff (McDonald and Punt, 2005). As an illustration of the working of the model, we pick on the application by McDonald and Punt (2001).…”

“…A general review of earlier CGE models used in South Africa is found in Thurlow and van Seventer (2002). Woolard and Wilson (2004) provide a more recent review of CGE modeling in South Africa with a focus on labour demand projections, while McDonald and Punt (2005) provide an overview of recent CGE models used to analyse agricultural issues. To our knowledge, no one has carried out a review of CGE models focused on trade liberalisation in South Africa.…”

The Short‐Term Economic Impact of Levying E‐Tolls on Industries

“…Very little inter‐regional trade data are available for South Africa, a problem expressed in McDonald and Punt (), similar to the problem in Australia in Horridge (). For this reason the same gravity formula was applied to construct trade matrices, similar to Horridge ().…”

Trade Liberalisation, Poverty and Inequality in South Africa: A Computable General Equilibrium‐Microsimulation Analysis*

“…This work is based on Computable General Equilibrium (CGE) analyses with a special focus on linking CGE models with micro data. Numerous CGE studies have analysed the effects of trade liberalisation in South Africa; Thurlow and van Seventer (2002) and McDonald and Punt (2005) provide useful reviews. Although these studies play an important role in attempting to understand the impact of complex policy changes on poor households, their empirical approach is hampered by the fact that trade liberalisation is mainly a macroeconomic phenomenon while poverty and inequality are mainly microeconomic issues.…”