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Analysing convergence with a multi-country computable general equilibrium model: PPP Versus MER

Dixon, Peter and Rimmer, Maureen T (2005) Analysing convergence with a multi-country computable general equilibrium model: PPP Versus MER. Energy and Environment, 16 (6). pp. 901-921. ISSN 0958-305X

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In studies of the greenhouse gas implications of convergence by developing countries to the per-capita GNPs of developed countries, considerable discussion has centred on whether purchasing power parity (PPP) or market exchange rates (MER) should be used in measuring per-capita GNPs. We suggest that technology gaps between developing and developed countries should be the starting point for convergence analysis rather than per-capita GNP gaps. We estimate two sets of initial technology gaps, using PPP and MER price assumptions combined with input-output data. In simulating the effects of closing technology gaps (convergence) using a dynamic, multi-country CGE model, we find:(1) the MER/PPP distinction matters. MER-based estimates of initial technology gaps lead to higher estimates of convergence-induced growth in greenhouse-gas-emitting industries in developing countries than do PPP-based estimates.(2) the industry detail in CGE models is valuable. Our simulations show a wide range of convergence-induced changes in output across industries.

Item Type: Article
Uncontrolled Keywords: convergence, greenhouse gas emissions, technology, purchasing power parity, market exchange rates, dynamic general equilibrium modelling
Subjects: Current > FOR Classification > 1402 Applied Economics
Historical > Faculty/School/Research Centre/Department > College of Business
Current > Division/Research > Centre of Policy Studies (CoPS)
Depositing User: Ms Julie Gardner
Date Deposited: 30 May 2014 04:09
Last Modified: 04 Oct 2015 23:54
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Citations in Scopus: 4 - View on Scopus

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