1 A Recursive Dynamic Computable General Equilibrium Model For ...

commodity. Domestic and foreign tourists are not seen as substitutes (i.e., assuming that
there is ‘tourism slack’, greater domestic tourist demand does not imply reduced foreign
tourist demand, or vice versa). Indeed, employing Leontief, we are assuming that the
composition of foreign/tourist demand expenditure remains constant and also moves in
direct proportion with the fortunes of the Spanish tourist industry. In the lower nests,
Armington CES nests are employed to characterise the substitutability between a domestic
commodity and an import composite commodity; and imports from the EU and non-EU
regions, respectively. These lower level Armington elasticities are the same as those
employed in the private household Armington nests.
f7tot
x7_ss(c1) ..........................x7_ss(cN)
x7_s(c1,“dotou”) x7_s(c1,“fotou”)
σ
Figure 6: The Tourism nest in ORANI-DYN.
In the ORANI-DYN CGE database represented in Figure 3 of part I of the report,
there is also a new account ‘8’ which represents NGO expenditures on commodities. The
model treatment for NGO expenditures follows the same simple structure that is used for
government (public) demands in the ORANI model. Thus, changes in NGO demands,
‘x8(c,s)’, can be proportional to a simple exogenous aggregate shock variable (specified by
the modeller), or alternatively employing a closure swap, it is possible to model changes in
NGO demands in direct proportion to endogenous changes in real aggregate Spanish
household demand.
4. Labour and capital transfer in ORANI-DYN
In the standard ORANI-G model, capital and labour may be allowed to move
perfectly between using industries ‘i’. This implies that the return of capital and labour is
σ
16
Leontief
Leontief
CES σ σ CES
x7(c1,“do”,“dotou”) x7mcomp(c1,“dotou”) x7(c1,“do”,“fotou”) x7mcomp(c1,“fotou”)
CES σ σ CES
x7(c1,“meu”,“dotou”) x7(c1,“mrow”,“dotou”) x7(c1,“meu”,“fotou”) x7(c1,“mrow”,“fotou”)