Estimation of Armington elasticities in a CGE economy–energy–environment model for Europe.

The main goal of the article is to estimate Armington elasticities of the energy and energy-intensive sectors of the GEM-E3 computable general equilibrium model. The model follows the standard two-stage budget optimisation of the consumer by first optimising between domestically produced and imported goods and, then, by country of origin. A panel data econometric framework is used here with dynamic adjustment to capture both the long and short term elasticities for the studied six aggregated sectors in Europe. The estimated long-term elasticities are in line with the literature, but higher than those used in the GEM-E3 model. The results suggest that consumer choice appears to be more price sensitive between the domestic and the composite imported goods, and amongst the importers, than already assumed in the model.

NÉMETH Gabriella;  SZABO Laszlo;  CISCAR MARTINEZ Juan Carlos; 

2011-09-23

ELSEVIER SCIENCE BV

JRC65137

0264-9993,   

http://www.elsevier.com/wps/find/journaldescription.cws_home/30411/description#description,    https://publications.jrc.ec.europa.eu/repository/handle/JRC65137,   

10.1007/s10368-007-0094-4,