The TERA CGE models: analysing labour migration in diverse regional economies in the EU
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The TERA CGE models: analysing labour migration in diverse regional economies in the EU Euan Phimister (University of Aberdeen, UK). SAM & General Equilibrium models Major Part of TERA project This Presentation and Next Complementary Aim - motivation, implementation, usefulness

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The TERA CGE models: analysing labour migration in diverse regional economies in the EU

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The tera cge models analysing labour migration in diverse regional economies in the eu

The TERA CGE models: analysing labour migration in diverse regional economies in the EU

Euan Phimister (University of Aberdeen, UK)


The tera cge models analysing labour migration in diverse regional economies in the eu

SAM & General Equilibrium models

  • Major Part of TERA project

  • This Presentation and Next Complementary

  • Aim - motivation, implementation, usefulness

    Structure

  • Background

  • Case Study Areas

  • Modelling Approach SAMs and CGE Models

  • Model Structure

  • Using Models - labour migration.


The tera cge models analysing labour migration in diverse regional economies in the eu

Background

TERA: Economic development in remote rural areas

Aims:

  • Role territorial factors which influence development

  • review whether existing policies take account of factors

  • propose new policy interventions.

    “The trends and choices that affect rural areas cannot be studied in isolation from what is going on in non-rural areas” (Saraceno, 1994)


The tera cge models analysing labour migration in diverse regional economies in the eu

Approach

  • Regional/Local

  • Modelling within region rural-urban linkages

    6 Case Study areas. Reflect different

  • Economic and Institutional Context

  • Spatial Scale

  • Rural-urban relationship


The tera cge models analysing labour migration in diverse regional economies in the eu

OECD Rural Classification


The tera cge models analysing labour migration in diverse regional economies in the eu

Case Study Differences

Spatial Scale NUTS3 to NUTS 4/5

Population levels 110K – 400K

Rural Pop Densities - 9.5 - 125 persons/km squared (Finland) –(Italy)

Economic Size 0.5bn - 2bn euros/year

GDP per capita. Developed (UK) – less developed (Latvia)

Rural share of GDP – 5% (Greece) to 60%(Finland)


The tera cge models analysing labour migration in diverse regional economies in the eu

CASE Study Areas: Summary Statistics


The tera cge models analysing labour migration in diverse regional economies in the eu

Modelling

  • Social Accounting Matrices (SAM) - all transactions given point in time

  • SAM - basis for Computable Equilibrium Model (CGE)

    SAM Construction - each study area

  • Existing secondary sources, e.g. national input-output tables

  • Primary Data collection

  • Survey of Households and Business survey, interviews with key informants


The tera cge models analysing labour migration in diverse regional economies in the eu

Computable Equilibrium Model (CGE)

Behaviour of representative agents in economy

  • Producers and Traders – maximise profits

  • Consumers – maximise their well-being (have demand curves)

  • Government collects taxes and makes transfers (tax rates and transfers are exogenously set)

    Model Closure rules – assumptions on how markets operate e.g. labour

    All transactions in “economy” accounted for.

    TERA-CGE Models

  • IFPRI Standard CGE Model (Lofgren et al) (www.ifpri.org/pubs/microcom/micro5.htm )

  • Disaggregation of Accounts allows rural-urban analysis


Level of disaggregation

Level of Disaggregation


The tera cge models analysing labour migration in diverse regional economies in the eu

Production structure

Local/Regional

Urban/Rural

Urban/Rural

Local/Regional


The tera cge models analysing labour migration in diverse regional economies in the eu

Factors and Households


The tera cge models analysing labour migration in diverse regional economies in the eu

CGE Model Estimation

  • Each case study area

  • Data - SAM plus other literature estimates

  • Procedure - calibrate CGE models so each CGE replicates Case study SAM

    CGE Model Usefulness

  • Full Picture of case-study economic transactions

  • Controlled experiments – what if ?

    Example Simple Scenario – labour migration

  • How different are the effects of large labour inflow/outflows in case study areas?


The tera cge models analysing labour migration in diverse regional economies in the eu

Case Study Areas Evidence

  • Significant Growth Greek, Scottish Study areas

  • Decline Finnish and Latvian areas

    Composition effect ?

  • Finland - outmigration of highly educated people

  • Scotland- in migrants (skilled) but work in low skilled occupations

    Scenario 1

    + 10% change in total labour supply all areas

    Scenario 2

  • -20% skilled labour category Czech R, Finland, Latvia

  • +20% unskilled labour category Greece, Italy, UK

    Key Assumptions

    Each case study area separate labour market

    Urban-rural labour market integrated within case study area

    Capital fixed by sector, Government spending fixed


The tera cge models analysing labour migration in diverse regional economies in the eu

Scenario 1 +10% change in total labour supply all areas

Aggregate level (GDP) broadly similar effects across case study areas

+10% positive impact 5-8% (-10% approximately same negative effect)

Components of GDP - Larger differences

Rural-urban decomposition +10% positive impact

Rural GDP effects 2-9%

Mostly Rural same or less than Urban effect (except Italy)

Largest differences GR, UK

Rural-urban sectoral decomposition +10% positive impact

Mostly Rural sectoral effect same or less than Urban effect(except Italy)

Largest differences GR, UK


Scenario 1 10 change in total labour supply all areas

Scenario 1 +10% change in total labour supply all areas


Scenario 1 10 change in total labour supply all areas1

Scenario 1 +10% change in total labour supply all areas


The tera cge models analysing labour migration in diverse regional economies in the eu

Scenario 2a) -20% skilled labour category Czech R, Finland, Latvia b) +20% unskilled labour category Greece, Italy, UK

Areas losing skilled labour

Big differences in overall loss 5-12.6%

Urban areas worst hit

Broadly, impact by sector comparable

Areas gaining unskilled labour

Some differences in overall gains 2-4%

No clear pattern whether Urban or rural areas gain most

Differential sectoral impact by rural-urban

Ratio Skilled: unskilled wages increases both losing & gaining areas


The tera cge models analysing labour migration in diverse regional economies in the eu

Scenario 2a) -20% skilled labour category Czech R, Finland, Latvia b) +20% unskilled labour category Greece, Italy, UK


The tera cge models analysing labour migration in diverse regional economies in the eu

Summary & Conclusions

  • Modelling Approach SAMs and CGE

  • CGE Models capture Case Study areas differences (?)

  • Labour migration

    General – Rural GDP case study area differences

    Urban effect often bigger than Rural

    Skills mix-differential losses and gains

  • Example CGE - What if?

  • Further simulations – tailored to specific circumstances of each case study area

  • Range simulations envisaged – Tourism, Transport, Agric Policy


The tera cge models analysing labour migration in diverse regional economies in the eu

Scenario 1 -10% change in total labour supply all areas


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