@article{Bouët:332443,
      recid = {332443},
      author = {Bouët, Antoine and Femenia, Fabienne and Laborde, David},
      title = {On the role of demand systems in CGE simulations of trade  reforms},
      address = {2014},
      pages = {35},
      year = {2014},
      note = {Presented at the 17th Annual Conference on Global Economic  Analysis, Dakar, Senegal},
      abstract = {Computable General Equilibrium (CGE) models are often used  to simulate the effects of political reforms. In these  models the way demand reacts to price and income changes is  of crucial importance when one wants to evaluate the  evolution of demand in the baseline or simulate the effects  of political reforms. Yet, functional forms used to model  households’ demand in CGE models do not necessarily exhibit  enough flexibility to fully account for income and price  changes on the structure of demand. Our objective in this  study is to empirically compare the results generated by a  CGE using different demand functions, to see if the  additional complexity associated to the flexibility of  demand really modifies the results and has an impact on  policy recommendations. We implement four demand systems in  the Mirage model: a Linear Expenditure-Constant Elasticity  of Substitution (LES-CES) function, a Cobb-Douglas  function, a Constant Elasticity of Substitution (CES)  function, and a Normalized Quadratic Expenditure System  (NQES) demand system. We conduct simulations of trade  reform with a particular focus. We then compare the  economic effects of the reform simulated with the different  demand functions. From these first results, the LES-CES  thus appears to be a good compromise between flexibility  and simplicity. It actually requires less parameters and  simplifies the model solving compared to the NQES to get  similar results.},
      url = {http://ageconsearch.umn.edu/record/332443},
}