OECD Development Centre Working Papers

The OECD Development Centre links OECD members with developing and emerging economies and fosters debate and discussion to seek creative policy solutions to emerging global issues and development challenges. This series of working papers is intended to disseminate the OECD Development Centre’s research findings rapidly among specialists in the field concerned. These papers are generally available in the original English or French, with a summary in the other language.

English, French

Aggregation by Industry in General Equilibrium Models with International Trade

Models of trading economies have become very large in dimensions and complex in structure. This paper seeks conditions under which it is possible to aggregate the production and consumption of groups of commodities in "industries": commodity groups sharing some common characteristics and behaviour. The most extreme form of aggregation is the simultaneous aggregation of the same commodities using the same aggregator functions on both the production and consumption sides of the model. This is called "complete aggregation". If this can be done, the competitive equilibrium can be determined in two stages and the commodity dimensions of a model can be reduced drastically, perhaps to very few. In other cases it is possible to aggregate commodities only on the production or the consumption side of the model. Such aggregation will simplify the production or consumption side and allow the derivation of new results.

Conditions which are sufficient for aggregation in production or ...


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