MIRAGE-e 2 structure overview

In a nutshell, MIRAGE-e 2 is a multi-sector multi-country CGE model which is particularly fitted to assess jointly trade policy and climate change mitigation policies

  • A representative agent, which gathers both consumers and the government, maximises a LES-CES utility function.
    • The consumer emits greenhouse gases from its consumption of fossil nergy goods
  • Firms in each sector maximize their profit function under the production function described in the supply side page:
    • Can be one representative firm under perfect competition or N identical firms under oligopolistic competition à la Krugman
    • Firms emit greenhouse gases from their production process and from consumption of fossil energy goods
  • Demand for final goods and intermediate goods are aggregated in two different Armington-like demand function as described in the demand side page.
    • Tariffs and NTMs are differentiated between final and intermediate goods, through aggregation
    • Non-tariff measures can be introduced, and modelled as an iceberg cost or a rent-creating trade cost (allocated to exporter or importer)

MIRAGE-e mainly relies on GTAP data, but also depends on several sources.

GTAP data

MIRAGE relies for SAMs on the GTAP database which currently provides data for 140 regions and 57 sectors. The model cannot run at this level of detail on a personal computer due to computation resource requirements and requires aggregation in a number of around 25 regions and 25 sectors.

GTAP also represents a strong network for research on global trade modelling. The GTAP official website constitutes an important source of information for CGE modellers.

Protection data

Data on protection are particularly sensitive for in trade policy assessment. For simulations done with MIRAGE, we do not use GTAP aggregated tariff but compute our own tariff equivalents thanks to the database MAcMap-HS6 developed at CEPII and that represents bilateral applied tariffs for 5,113 products in the HS6 nomenclature. The tariff aggregation is done through the use of reference groups.

See section: MAcMap database

Non-tariff measures

MIRAGE-e is able to take non-tariff measures into account. It relies on the following data:

Baseline

MIRAGE-e baseline is built using the EconMap database. It is used to calibrate the baseline trajectory of:

  • Total factor productivity
  • Population by education level
  • Savings rate and current account
  • Energy efficiency

See section: baseline

Supply and Demand

The strength of the CGE framework is its foundation on microeconomic equations that represent the behaviour of agents in a consistent neo-classical framework. In MIRAGE, a representative agent is maximising its utility relatively to the perceived set of prices, and the demand in countries is complemented by investment demand under budget constraint and firms maximising their profit. The supply and demand of countries are entangled through international trade relations which make them interdependent.

See sections:

Production factors

The representation of factor markets is also crucial to determine the mobility of production factors across countries and sectors, as well as their availability. There are in MIRAGE three type of factors common to all productive sectors: capital, skilled labour and unskilled labour. Additionally, primary sectors are also dependant on land (agriculture) and natural resources (for mining, forestry and fishing sectors).

See sections:

MIRAGE-e has several energy-oriented features:

1. ^ Lionel Fontagné, Cristina Mitaritonna, José E. Signoret, 2016. Estimated Tariff Equivalents of Services NTMs. CEPII Working Papers, 2016-20.
2. ^ Hiau Looi Kee, Alessandro Nicita, Marcelo Olarreaga, 2009. Estimating Trade Restrictiveness Indices*. The Economic Journal, 119, Blackwell Publishing Ltd, pp.172–199, ISSN 1468-0297.