Macro-Micro Models

PEP working paper series

26 Pages Posted: 30 Sep 2015 Last revised: 11 Jul 2018

See all articles by John Cockburn

John Cockburn

Partnership for Economic Policy (PEP); Université Laval; Partnership for Economic Policy (PEP)

Luc Savard

Université de Sherbrooke - Department of Economics

Luca Tiberti

Université Laval; Partnership for Economic Policy (PEP)

Date Written: August 1, 2015

Abstract

Since the late seventies, researchers and policy makers have sought to analyse and simulate the impacts of macro policy reforms on income distribution. Concerns such as the social implications of structural adjustment policies, poverty/inequality effects of trade liberalization, pro-poor or inclusive growth or the poverty impacts of the global food and, subsequently, financial and economic crisis have driven this research agenda.

This type of analysis requires tools that combine both macro and micro frameworks. The integration of microsimulation techniques within a computable general equilibrium (CGE) model constitutes such a tool. While CGE models focus on the sectoral, macro and price effects of major policy reforms, they generally fail to adequately capture distributive impacts. On the other hand, microsimulation techniques focus on the household- and individual-specific distributive effects, but are generally confined to micro reforms as they are unable to model general equilibrium effects – notably on the prices of factors and products, as well as other macro variables – of macro reforms. Combining these tools allows the analyst to track the impact of a major policy change or external shock on macroeconomic or sectoral variables down to the change in income or welfare at the household level. The flexibility of both tools has allowed inter alia for distributional impact analysis of various policies and programs in the context of the Millennium Development Goals and the Monterrey Consensus.

Keywords: Economic modelling, macro-micro modelling, microsimulations, income distribution

JEL Classification: C68, C81, H31, D58, D31

Suggested Citation

Cockburn, John and Savard, Luc and Tiberti, Luca, Macro-Micro Models (August 1, 2015). PEP working paper series. Available at SSRN: https://ssrn.com/abstract=2665266 or http://dx.doi.org/10.2139/ssrn.2665266

John Cockburn (Contact Author)

Partnership for Economic Policy (PEP) ( email )

P.O. Box 30772-00100
ICIPE - Duduville Campus, Kasarani
Nairobi
Kenya

Université Laval ( email )

Dept. of Economics
Québec, Quebec G1V 0A6
Canada

Partnership for Economic Policy (PEP) ( email )

Duduville Campus, Kasarani
P.O. Box 30772-00100
Nairobi
Kenya

Luc Savard

Université de Sherbrooke - Department of Economics ( email )

Sherbrooke, Quebec J1K 2R1
Canada

Luca Tiberti

Université Laval ( email )

2214 Pavillon J-A. DeSeve
Quebec, Quebec G1K 7P4
Canada

Partnership for Economic Policy (PEP)

P.O. Box 30772-00100
ICIPE - Duduville Campus, Kasarani
Nairobi
Kenya

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