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The Net Social Revenue Approach to Solving Computable General Equilibrium Models

Staff working paper

This paper by John Salerian and Tim Murray was released on 13 December 2019.

The genesis of the work was our warm-up to evaluate the assistance provided to emission intensive trade exposed industries under the abandoned carbon pollution reduction scheme. The nonlinear programming approach to Computable General Equilibrium (CGE) modelling described here allows the inclusion detailed engineering/economic principles underlying industries and the direct modelling of policies.

The approach overcomes the issue of linking what are essentially incompatible models (for example, an electricity model and a CGE model - see related publication) when trying understand and evaluate the impact of policies on certain industries (such as electricity).

The paper here presents the proof of concept using a standard small CGE model.

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