Non-Competitive CGE Model: Microeconomic Foundations, Equations and Calibration

By ZERBO Adama, May 2022

This paper proposes a non-competitive CGE model with microeconomic foundations as clear as those of the Walrasian CGE model. Drawn essentially from the General Theory of the Firm, the microeconomic foundations developed make it possible: (i) to take into account the imperfections in the CGE modeling without opting for a specific theoretical framework of imperfect competition, (ii) that unemployment does not result from the choice of the modeler to force or not the existence of unemployment through the specific equations, ( iii) to better understand the behavior of economic agents in terms of foreign trade and to limit the level of arbitrariness in the calibration of the parameters of the import and export functions; (iv) to determine the investment demand function of firms in each branch of activity considered in the model; (v) to determine the expressions of the price of each product and the average wage of each branch of activity. Thus, this non-competitive CGE model is more suitable for understanding the effects of public policies and other shocks on labor market, employment, household income, investment, economic growth and foreign trade, as well as prices.

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