$TITLE Model M38_MPS: Closed 2x2 Economy -- Pollution Externality from X $ONTEXT This is the exact same model as M1_MCP.GMS but uses the MPS/GE format. Production Sectors Consumers Markets | X Y W | CONS ------------------------------------------------------ PX | 100 -100 | PY | 100 -100 | PW | 300 | -200 PL | -25 -75 | 100 PK | -75 -25 | 100 PEN | -100 | 100 ------------------------------------------------------ $OFFTEXT PARAMETERS LENDOW Labor endowment multiplier; LENDOW = 1; $ONTEXT $MODEL:M1_MPS $SECTORS: X ! Activity level for sector X Y ! Activity level for sector Y W ! Activity level for sector W (Hicksian welfare index) $COMMODITIES: PX ! Price index for commodity X PY ! Price index for commodity Y PL ! Price index for primary factor L PK ! Price index for primary factor K PW ! Price index for welfare (expenditure function) PEN ! environmental good $CONSUMERS: CONS ! Income level for consumer CONS $AUXILIARY: POL ! Pollution externality: amount of PEN "stolen" by X prod TAX ! Endogenous environmental tax $PROD:X s:1 O:PX Q:100 I:PL Q:25 I:PK Q:75 $PROD:Y s:1 O:PY Q:100 I:PL Q:75 I:PK Q:25 $PROD:W s:1 O:PW Q:300 I:PX Q:100 A:CONS N:TAX I:PY Q:100 I:PEN Q:100 $DEMAND:CONS D:PW Q:300 E:PL Q:(100*LENDOW) E:PK Q:100 E:PEN Q:200 E:PEN Q:(-1) R:POL $CONSTRAINT:POL POL =G= X*100; $CONSTRAINT:TAX PX*(1+TAX) =G= PX + PEN; $OFFTEXT $SYSINCLUDE mpsgeset M1_MPS PW.FX = 1; TAX.FX = 0; $INCLUDE M1_MPS.GEN SOLVE M1_MPS USING MCP; * Solve the counterfactuals TAX.UP = +INF; TAX.LO = -INF; $INCLUDE M1_MPS.GEN SOLVE M1_MPS USING MCP;