Combining microsimulation with CGE and macro modelling for distributional analysis in developing and transition countries

This paper overviews recent work that has attempted to bring together microsimulation, Computable General Equilibrium (CGE) and macro models to perform distributional analysis in developing and transition countries. Particular attention is paid to applications relating to aspects of economic growth and political economy. Applications in which macro, CGE and microsimulation models are either layered or integrated are considered. It is demonstrated that different combinations of such models, including those where only a single model-type is used, are appropriate for different problems. For short-run impact analysis, microsimulation on its own may be appropriate. For longer-run analyses, where interest is in the interrelationship between changes in disposable income, consumption and labour supply, these models need to be supplemented a combination of microsimulation on the one hand, and general equilibrium price changes or changes in macro variables on the other hand. In the case of national subregions, or countries embedded in free-trade areas, it is argued that microsimulation may adequately be combined with pure macro models. That is, CGE modelling may not be necessary. For distinct national economies, however, the first step beyond microsimulation should likely be integration with CGE modelling. Whilst much promising work has been undertaken on dynamic integrated CGE microsimulation work in developing countries, CGE work is most advanced for Less Developed Countries. At present several groups of development researchers are found to be putting these two approaches together, and in some cases are adding macroeconomic and financial modelling as well. In contrast, with a few conspicuous exceptions, little such work is being done for the transition economies.CGE; political economy; growth

Microsimulation, CGE and Macro Modelling for Transition and Developing Economies

microsimulation, computable general equilibrium, development, transition

Collisions and close encounters involving massive main-sequence stars

We study close encounters involving massive main sequence stars and the evolution of the exotic products of these encounters as common--envelope systems or possible hypernova progenitors. We show that parabolic encounters between low-- and high--mass stars and between two high--mass stars with small periastrons result in mergers on timescales of a few tens of stellar freefall times (a few tens of hours). We show that such mergers of unevolved low--mass stars with evolved high--mass stars result in little mass loss ($\sim0.01$ M$_{\odot}$) and can deliver sufficient fresh hydrogen to the core of the collision product to allow the collision product to burn for several million years. We find that grazing encounters enter a common--envelope phase which may expel the envelope of the merger product. The deposition of energy in the envelopes of our merger products causes them to swell by factors of $\sim100$. If these remnants exist in very densely-populated environments ($n\gtrsim10^{7}$ pc$^{-3}$), they will suffer further collisions which may drive off their envelopes, leaving behind hard binaries. We show that the products of collisions have cores rotating sufficiently rapidly to make them candidate hypernova/gamma--ray burst progenitors and that $\sim0.1$ of massive stars may suffer collisions, sufficient for such events to contribute significantly to the observed rates of hypernovae and gamma--ray bursts.Comment: 15 pages, 13 figures, LaTeX, to appear in MNRAS (in press

Optimal tax mix in a two-sector growth model with transitional dynamics

This paper examines the problem of optimal tax mix analytically in a two-sector growth model with transitional dynamics. Tax revenue is required to provide a pure public good. The key problems are: over-consumption of leisure under labor income or consumption taxes; and under-investments in human and physical capital under income taxes. Without investment subsidies, consumption taxes do better than uniform income taxes, but can be improved on locally via positive taxation of physical capital income and a negative tax on labor income. With subsidies the first best can be achieved in a system where: (i) if consumption and labor income taxes are non-zero they are of the same rate but opposite signs, (ii) the tax rate on physical capital income exceeds that on labor income, (iii) subsidy rates on investments equal income tax rates, for both forms of capital. In any given circumstances, a range of alternative tax mixes may provide equivalent results. This result, combined with practical constraints, may help to explain the variety of tax mixes observed across countries.Growth; Transitional dynamics; Optimal taxation; Subsidies