Multi-Regional CGE
MODEL LAB · LABORATORY 13
Multi-Regional
CGE.
Model every region as an interacting economy. Trace bilateral trade, factor movement, price transmission and feedback effects to understand how a local shock becomes a national pattern of growth, displacement and cohesion.
A SYSTEM OF REGIONAL ECONOMIES
Every place adjusts.
Every place feeds back.
A multi-regional CGE model represents all regional economies simultaneously. No connected region is merely an external residual: its production, prices and factor markets respond endogenously.
Regional supply
Technology, endowments and local prices determine production in every region.
Bilateral trade
Origin-specific goods move through a complete matrix of regional destinations.
Factor mobility
Labour and capital respond to spatial returns under explicit mobility costs.
Regional prices
Local scarcity, transport costs and trade substitution create differentiated price effects.
FOUR PROPAGATION PATHS
A regional shock
travels through networks.
Trade transmission
pʳˢ = pʳ(1 + τʳˢ)
Demand and cost changes alter bilateral delivered prices and sourcing patterns.
Mobility transmission
ΔFʳˢ = φ(ΔRʳ − ΔRˢ)
Differences in wages and returns redirect labour and capital across space.
Demand feedback
Yʳ → Cʳ → Qˢ
Regional income changes alter consumption and create new production effects elsewhere.
THREE-REGION EQUILIBRIUM LAB
Shock one node.
Watch the system move.
Choose the investment region and adjust trade and factor mobility. ECONORIA distributes output, employment and migration effects across the complete regional network.
SYSTEM READINGCentral captures most of the direct gain, while trade spreads production to North and South. Mobility redistributes employment and population across the system.
MULTI-LEVEL POLICY INTERPRETATION
Efficiency and cohesion
can diverge.
Origin effect
The region receiving expenditure need not retain most production or household income.
Network centrality
Well-connected regions can capture spillovers even when they are not directly targeted.
Displacement
Mobile factors may leave lagging regions, offsetting positive trade spillovers.
Cohesion design
Place-based policy should be judged by the full regional distribution, not only national GDP.
SCIENTIFIC CHECKPOINT
Why solve every region
simultaneously?
What is the central methodological reason?
A connected region is endogenous, not a passive residual.
Continue to Laboratory 14: Calibration, Validation and Sensitivity →
