The advantage of avoiding the Armington assumption in multi-region models

Abstract

Most computable general equilibrium models that describe interactions between multiple regions employ the assumption that goods that are produced in different regions are imperfect substitutes for each other. This assumption yields few benefits for multi-region models of a nation and unnecessarily prolongs the time to solve such models. The paper describes an alternative algorithm that reduces convergence time and permits the construction of models with many regions and many less-than-perfectly mobile factors of production