The aim of this book is to make more widely available a body of recent research
activity that has become known as applied general equilibrium analysis. The
central idea underlying this work is to convert the Walrasian general equilibrium
structure (formalized in the 1950s by Kenneth Arrow, Gerard Debreu, and others)
from an abstract representation of an economy into realistic models of actual
economies. Numerical, empirically based general equilibrium models can then
be used to evaluate concrete policy options by specifying production and demand
parameters and incorporating data reflective of real economies.
In this book, Shoven and Whalley describe all aspects of developing applied
general equilibrium models, including developing an appropriate equilibrium
structure, calibrating the model, compiling counterfactual equilibria, and
interpreting results. The first two parts of the book develop the techniques required
to apply general equilibrium theory to policy evaluations. The ο¬nal part presents
a number of applications made by the authors in their previous research work in
public finance, intemational trade, development, regional economics, and
energy economics.
The authors contend that the Walrasian general equilibrium model provides
an ideal framework for appraising the effects of policy changes on resource
allocation and for assessing who gains and loses, policy impacts not well covered
by empirical macro models. The applications in the book illustrate a number of
ways in which fresh insights are provided in long-standing policy controversies.