Tools for Open Source, Subnational CGE Modeling with an Illustrative Analysis of Carbon Leakage

Abstract

This paper introduces the Wisconsin National Data Consortium (WiNDC) framework for producing self-consistent accounts based on publicly available datasets that can be used in sub-national economic equilibrium analysis in the United States. We describe the process used to generate regional social accounting matrices and a calibrated static multi-regional, multi-sectoral computable general equilibrium model conformal with the constructed dataset. As illustration, we show how the core model can be applied for the analysis of energy-environment issues. We use an energy economy extension of the core model to assess the effectiveness of several state level greenhouse gas mitigation proposals. Sub-national abatement measures result in carbon leakage - mandated reductions in controlled areas may be vitiated by increased emissions in uncontrolled jurisdictions. Using a WiNDC-based model, we calculate leakage rates and show how these depend on the underlying trade model. Our calculations demonstrate the importance of both data and modeling assumptions for the simulation of policy experiments.