This paper investigates the magnitude and macroeconomic relevance of internal trade frictions—specifically freight transport and logistics costs—within the European Union, framing them as sui generis internal duties or non-tariff barriers that create "invisible walls" across the Single Market. Due to the severe limitations and reliability issues inherent in official statistical databases regarding bilateral transit margins, we propose an alternative empirical strategy. By harmonizing Eurostat’s SITC Rev. 4 trade data with the multi-sectoral structural framework of the Global Trade Analysis Project (GTAP) social accounting matrix, we estimate bilateral origin-destination distribution margins across all 27 EU member states for six transportable commodity sectors. Our empirical findings reveal an average intra-European distribution margin of 6%, driven heavily by a commodity's value-to-weight ratio and country-specific geographic features, such as peripheral isolation or infrastructure bottlenecks. To evaluate the systemic and general equilibrium impacts of these frictions, the estimated margins are integrated into a global Computable General Equilibrium (CGE) simulation model. We simulate a hypothetical 50% reduction in all intra-European logistics costs, uncovering profound macroeconomic implications. The optimization of internal distribution networks generates an aggregate welfare gain of approximately $161 billion annually for the European Union and stimulates intra-EU trade flows by 5.72%, while simultaneously inducing a strategic trade diversion that contracts imports from extra-EU partners like China. Furthermore, the general equilibrium effects manifest asymmetrically across member states. While the continent's largest economies secure the highest absolute welfare benefits (quantifiable at $33 billion for Germany and $19 billion for France), the most transformative expansions in gross production volume are concentrated within highly open, smaller economies, led by Lithuania (+0.54%), Hungary (+0.45%), and Slovakia (+0.43%). Ultimately, the study highlights that sustaining the long-term international competitiveness of the Single Market requires European trade policy to expand beyond legal harmonization and actively invest in dismantling physical network inefficiencies.

Water, energy, food, and ecosystems are linked in a complex system known as the WEFE nexus. Implementing policies in this system affects all other sectors, often in unanticipated ways. Integrated modelling and assessment of the system is necessary to start to understand these complex linkages. In this paper, a system dynamics model of the WEFE nexus in the Inkomati-Usuthu Water Management Area, South Africa, is presented that models the nexus as a complete, coherent system and assesses the impact of policy actions against reference scenarios. Results show that enacting individual policies tend sto have relatively minor impacts confined to one or two WEFE sectors. Implementing many policies in parallel has mich larger system wide impacts, often being detrimental (e.g. negatively affecting the water balance). Such modelling can help policy makers understand this complexity, and can start discussions on to design policies to avoid negative impacts and leverage synergies.

This paper presents a data set, associating education levels to occupations, and a methodology, which allow estimating how the distribution of the two variables could change, after some exogenous shock affecting the labor market. We assess some implications of the empirical finding that, in response to a weaker demand for labor, sufficiently educated workers would reallocate themselves into lower-ranked occupations, rather than getting unemployed. The exercise is conducted with Italian data, where 37 occupations and 10 education levels are considered. A counterfactual distribution is estimated, using a computable general equilibrium model to simulate the impact on the labor market of a trade disruption crisis with Russia.

Socio-economic modeling based on GRDEM model

We propose, in this paper, a novel approach to modelling education and human capital formation in a computable general equilibrium model. Rather than adopting microeconomic-based assumptions of human capital formation, the method is based on an empirical relationship between labor force composition and expenditure in education services. After realizing a set of econometric estimates, we found some robust relationship between workers’ shares in the labor force and educational expenditure, in real terms and per capita. To assess the implications of these findings, we simulate, in a conventional CGE model for Ethiopia, the impact of an increase in public expenditure devoted to education. Our simulation results highlight the existence of a multiplicative effect, such that the overall increase in the supply of education services, in the final equilibrium state, is more than three times larger than the initial demand push. This comes associated with a positive supply shock, entailing gains in productivity, income, and welfare, as well as changes in the structure of the economy.

This paper presents a methodology to account, in a computable general equilibrium model, for the presence of underemployment in an economic system. The methodology is based on the estimation of a matrix, mapping different categories of workers to levels of educational attainment. A procedure is proposed, which allows to recalculate the matrix after the realization of a simulation with a CGE model, when employment levels are varied. In this way, a new matrix is made consistent with the simulation results, identifying a new equilibrium in the labor market, which entails a different combination of unemployment and underemployment.

The COVID19 pandemic has had a strong economic impact on the different productive sectors..However, the effects have been very unevenly distributed.Some industries, most notably those related to tourism, suffered the most, whereas some others were only marginally affected, or even experienced some expansion.Focusing on the regional economy of Andalusia, this study employs a computable general equilibrium model, to investigate the structural adjustment process, triggered by the sudden drop in tourism demand, generated by the mobility restrictions introduced in 2020.The model highlights how variations in relative prices could have allowed the agricultural sector to partly compensate the macroeconomic shock, in particular by absorbing some of the additional unemployment.

This paper presents a simulation exercise undertaken with a newly available regional general equilibrium model for the Spanish region of Andalusia. The exercise is intended to assess the structural adjustment processes and impacts on the Andalusian economy directly induced by the dramatic fall in tourism expenditure which occurred in the year 2020, due to the prevention measures implemented because of the COVID-19 pandemic. We also undertake a preliminary evaluation of the impact on some environmental indicators, such as greenhouse gases emissions and air pollutants. The key insight emerging from our analysis is that the COVID crumbling of tourism demand reduces the environmental pressure but also generates very relevant distributional consequences. We believe that these insights are not peculiar to Andalusia but could be extended to many other regions in the world, especially those similar in terms of magnitude of the shock, economic structure, and labor market. We illustrate the latter point by contrasting Andalusia with a set of South-East Asian countries.

In this paper, a novel approach to modelling education and human capital formation in a computable general equilibrium model is proposed. Rather than adopting microeconomic-based assumptions of human capital formation, the method is based on an empirical relationship between labor force composition and expenditure on education services. It is found some robust correlation between workers’ shares in the labor force and educational expenditure, in real terms and per capita. To assess the implications of these findings, the impact of an increase in public expenditure devoted to education is simulated in a conventional CGE model for Ethiopia. The simulation results highlight the existence of a multiplicative effect, such that the overall increase in the supply of education services, in the final equilibrium state, is more than three times larger than the initial demand push. This comes associated with a positive supply shock, entailing gains in productivity, income, and welfare, as well as changes in the structure of the economy.

Most projections of long-term economic development, such as the shared socioeconomic pathway (SSP) scenarios in climate change research, do not quantify future effects on income distribution and poverty. To address this research gap, we present some numerical simulations based on a recursive-dynamic general equilibrium model with household details, focusing on relative and absolute poverty in six developing countries: Albania, Bolivia, Ethiopia, Malawi, Nicaragua, and Vietnam. The results under the SSP2 reference scenario suggest that the exogenously projected gross domestic product (GDP) and population growth, combined with long-term structural change, produce lower absolute but higher relative poverty. An alternative scenario of stronger trade integration further amplifies the impact on income inequality. Indeed, more international trade tends to increase capital income, which mainly benefits rich households, but generally decreases agricultural earnings, which are important for rural poor households.

This survey presents the recent and rapidly expanding literature, which analyses the economic impacts of the COVID 19 pandemic, by means of Computable General Equilibrium (CGE) modelling. It does so not only by contrasting and assessing the different methodological approaches, and the key findings of the simulation exercises, but also by putting the various contributions in a historical perspective. This is necessary, because each CGE based study should be evaluated while keeping in mind when it was realized, since questions, priorities, expectations have been constantly changing during the spreading of the pandemic.

The present study develops an integrated assessment model (IAM) for food security under climate change for South Asia. For IAM, initially, an econometric model is estimated that identifies the impact of climate change on crop yields, using the historical relationships between temperature, precipitation, and the production of cereals. Subsequently, future projections have been collected for temperature and precipitation from climate models of the Coupled Model Inter-comparison Project Phase 5 (CMIP5), and the previous econometric model is applied to obtain the implied future cereal yields changes. Then, the yield variations are fed into a multiregional Global Trade Analysis Project (GTAP) model, calibrated to the GTAP 9 database, taking the form of decreases in factor-augmenting productivity of the grains sector. Further, the present study evaluates the effects of climate change on an individual South Asian country. The results indicate that change in climate decreases food production, increases food prices, decreases food consumption, and thus affects the welfare. Trade and fiscal policy responses are investigated to combat the problem of food security. It is revealed that these two policies fail to compensate climate change damage in all the selected South Asian countries.

This paper presents the structure, data sources, assumptions and simulation methods of the Modelo de Equilibrio General para Andalusia_ (MEGA), a regional CGE model that has been designed for the analysis of the Andalusian economic structure, but which could also be applied to other regional economies. The document is intended to be a reference for simulation and assessment exercises based on this model.

This paper presents a simulation exercise undertaken with a newly available regional general equilibrium model for the Spanish region of Andalusia. The exercise is intended to assess the structural adjustment processes and impacts on the Andalusian economy directly induced by the dramatic fall in tourism expenditure which occurred in the year 2020, due to the prevention measures implemented because of the COVID-19 pandemic. We also undertake a preliminary evaluation of the impact on some environmental indicators, such as greenhouse gases emissions and air pollutants. The key insight emerging from our analysis is that the COVID crumbling of tourism demand generates very relevant distributional consequences.

Motivated by the emerging demand for the construction of internally consistent and sufficiently detailed scenarios of long-run economic development, in this paper we present a computable general equilibrium model (G-RDEM), specifically designed for the generation of long run scenarios of economic development, featuring a non-homothetic demand system, endogenous saving rates, differentiated industrial productivity growth, interest payments on foreign debt and time-varying input-output coefficients. We illustrate how parameters of the five modules of structural change have been estimated, and we test the model by comparing its results with those obtained by a more conventional recursive dynamic computable general equilibrium model, not designed to capture structural adjustment processes. It is indeed found that the two model formulations do produce different findings, both globally and at the regional and industrial level. Our numerical tests suggest that one very important factor is the decline in the aggregate saving rates (due to higher dependency ratios in the demographic structure), which influences capital stock accumulation, investments, composition of the final demand and productivity. In terms of employment of primary resources, we detected a general pattern of decline in the primary sector, compensated by an increase in several service industries.

This paper presents an empirical exercise, aimed at investigating the implications on poverty and income distribution of a reference scenario (SSP2) of economic development. It does so by coupling a dynamic general equilibrium model of the global economy, specifically designed to capture structural change dynamics in the medium and long run, with detailed micro data on household income in six countries: Albania, Bolivia, Ethiopia, Malawi, Nicaragua and Vietnam. We also consider an alternative scenario of accelerated international trade integration, with a higher degree of trade openness. We found that long run structural change widens income inequality in all six developing countries. Accelerated trade integration amplifies the effect further, but most of it is already generated in the baseline scenario. A decrease in the relative value of land property and an increase in the relative value of capital ownership appear as key determinants. We decompose income differentials in three dimensions. Structural change worsens the income gap between male and female headed households, but the additional impact of trade is minimal. The effect of structural change is not uniform across countries when income of rural households is contrasted with the one of urban households, yet more trade reduces the relative rural income. Relative poverty increases in both the baseline and the larger trade volume case. However, we found that absolute poverty would be eradicated in almost all countries by the year 2050.

Paolo Costa, Hercules Haralambides and Roberto Roson, in chapter 8, look back at the genesis – in Europe – of the transnational transport infrastructure which has long coincided with the Ten-T network, developed – sometimes as a weak Keynesian stimulus – as a tool for strengthening the cohesiveness and economic efficiency of the internal market. Following the enlargement of the EU, Ten-T has been evolving from 1996 to 2013, and has been encouraging modal shifts from road and air to rail, inland navigation and short-sea shipping, in order to achieve higher environmental sustainability and combat climate change. However, during these notable efforts, little attention has been paid to the external dimension of European connectivity. Along with addressing a number of technical disruptions affecting transport and its infrastructure, the new wave of Ten-T revision – due by December 2023 – must depart from what has thus far been an introverted view of Europe as a single market (something that has often penalized European competitiveness) to an extroverted orientation of the Union as a key player in a global market. The growing economic centrality of Asia since China’s accession to the World Trade Organization (WTO); China’s strong interest in the Mediterranean Basin as the “super-hub” that connects four continents; and the eastward shift of the European economic barycentre: all of these developments indicate possible solutions for addressing the “geographical obsolescence” of the current Ten-T. In parallel, innovation-driven disruption of the worldwide maritime freight transport network and its infrastructure necessitates the streamlining of port nodes and rail networks around the world, in a way that at the same time addresses efficiently the current “technological obsolescence” of big parts of European infrastructure, predominantly of ports. The authors argue that new Ten-T network evolving into a Twn-T (Trans-Global) one ought to no longer be the product solely of European decisions: dovetailing Ten-T with China’s "Belt and Road Initiative - BRI" will not only be unavoidable but also, rather, a most welcome development.