General Equilibrium Modelling: The Integration of Policy and Project Analysis

This paper presents an overview of frontier topics of general equilibrium that are especially important to effectively integrate the policy and project dimensions of the equilibrium analysis. Project evaluation as a new frontier for modelling implies a general view of the traditional benefit-cost calculations that researchers can now afford implementing thanks to the recent computational developments that can host more realistic assumption about model closures. A differential representation of general equilibrium permits also to unveil the opportunity cost structure associated with alternative resource uses of both policy and project evaluations. This extension enriches the policy content of both the micro and macro level of the equilibrium analysis. It takes advantage of the fact that in a modern policy and project analysis the micro-macro link exactly aggregates from the individual to the family, community, which is often the level of feasibility and impact analysis of large projects, and society level using micro and macro behavioural models that are closely integrated.