A trade algorithm for multi-region models subject to spillover externalities
نویسندگان
چکیده
In this paper we present an algorithm that deals with trade interactions within a multi-region model. In contrast to traditional approaches this algorithm is able to handle spillover externalities. We focus on technological spillovers which are due to capital trade. The algorithm of finding a paretooptimal solution in an intertemporal framework is embedded in a decomposed optimization process. The paper analyzes convergence and equilibrium properties of this algorithm. In the final part of the paper, we apply the algorithm to investigate possible impacts of technological spillovers. While benefits of technological spillovers are significant for the capital-importing region, benefits for the capital-exporting region depend on the type of regional disparities and the resulting specialization and terms-of-trade effects. JEL classification: C68;O41;F43;F12;C62 keywords: multi-region modeling, technological spillovers, externality, general equilibrium, capital trade ∗PIK Potsdam Institute for Climate Impact Research, P.O. Box 60 12 03, D-14412 Potsdam, Germany, Tel. ++49/331/288-2556, e-mail: [email protected]
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