CoPS/IMPACT Working Paper Number G-334

Title: Preparing a multi-country, sub-national CGE model: EuroTERM including Ukraine

Author: Glyn Wittwer


This paper describes the preparation of a database that identifies 74 industries in each of 328 regions in 40 countries, predominantly in Europe. The data are configured to support EuroTERM models of Europe at user chosen levels of industry and regional disaggregation.

The TERM (The Enormous Regional Model) methodology has been applied to many countries over the past two decades to model sub-national regional impacts of policy scenarios. The methodology does not rely on sub-national regional input-output tables. Instead, estimates of regional activity shares are used to split a national CGE database into regions. Activity shares are based on industry by region employment numbers extracted from census data, regional agricultural and mining activity data and international trade data by port.

EuroTERM provides an example of extending the TERM methodology. First, the GTAP master database is aggregated for non-European nations while keeping European nations plus Ukraine, Russia, Moldova (proxied by Rest of Eastern Europe), Belarus, Georgia, Albania, Iran, Turkey and North Africa represented separately. The database is reconfigured to 40 individual CGE databases.

Using NUTS2 data and regional data for the oblasts of Ukraine, regional shares are estimated. Eurostats is the main source of these data. Regional shares provide the basis for splitting 24 European CGE databases to the NUTS-2 level and Ukraine to oblasts. The other nations in the database remain as single country regions. Industry cost structures or technologies are based on GTAP data for each nation. This approach differs from single-nation TERM, in which a single industry technology applies to each region.

The methodology used to estimate inter-regional trades in TERM has been modified to accommodate matrices of known international trades from GTAP, while splitting origins and destinations into sub-national regions. Port activity data also contribute to estimation of subnational trade matrices.

Electricity Global data on power plants by location have contributed to a split of electricity into 9 generating sectors plus distribution.

The war in Ukraine has provided motivation for adding Ukraine, represented by 24 oblasts plus Kyiv city. The EuroTERM master database at present includes 74 sectors in 328 regions. A prototype 438 region GlobeTERM model, including virtually all regions in the GTAP master database, has also been developed as part of the project.

JEL classification: C68; R10; R11; R15

Keywords: regional economics; Europe; global analysis

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