3-Country × 3-Sector CGE Model

A miniature computable general equilibrium model with three regions (USA, EU, ROW) producing three goods (Agriculture, Manufacturing, Services). Goods are imperfectly substitutable across origins (Armington), production uses Cobb–Douglas with capital, labor, and intermediate composites, and households consume a CES bundle of domestic and imported varieties. Markets clear via a tâtonnement-style price solver.
Armington trade CD production CES demand Walrasian closure equilibrium

1. Scenario & Policy Shocks

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Pick a preset scenario or move the sliders below. The model resolves to a new general equilibrium after every change.

Tariffs (importer × good)

Ad valorem tariff applied by the importing country on imports of a good from both trading partners.

Productivity shifters Ar,s

Hicks-neutral total factor productivity multiplier (1.00 = baseline).

Endowments & preferences

2. Equilibrium Summary

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Real GDP & welfare (% Δ from baseline)

Equilibrium prices

Numéraire: USA wage wUSA = 1. All other prices are relative.

Trade balances

Sums across goods. Walras' law ⇒ world balance ≈ 0.

3. Graphical View — Production, Trade, and Consumption

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Sectoral output by country (Δ vs. baseline)

Agriculture Manufacturing Services

Bilateral trade flows (Sankey-style)

USA origin EU origin ROW origin

Circular flow: factor incomes → household → consumption

Price level by country & sector

USA EU ROW

4. Numerical View — Social Accounting Matrix

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Production (output, value added, intermediates)

Final consumption Cr,s,o (importer × good × origin)

Rows are (importer, good); columns are origin country. Values in real units.

Bilateral trade matrix (exporter → importer, summed across goods)

5. Model Specification

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Sets

Regions r ∈ {USA, EU, ROW}, sectors s ∈ {AGR, MFG, SVC}, origins o ∈ {USA, EU, ROW}.

Production

Cobb–Douglas value added with intermediates as a fixed-coefficient composite at the top:
Yr,s = Ar,s · min( VAr,s / αVAr,s  ,  INTr,s / αINTr,s )
VAr,s = Kr,sβr,s · Lr,s1−βr,s

Armington aggregation (consumer side)

Consumers in region r buy a CES composite of domestic and imported varieties of good s:
Qr,s = [ Σo δr,s,o1/σ · Xr,s,o(σ−1)/σ ]σ/(σ−1)
with elasticity σ = 3 and ad valorem tariff τr,s on imports (o ≠ r).

Household demand

Cobb–Douglas over Armington composites with budget shares θr,s:
max Πs Qr,sθr,s   s.t.   Σs PQr,s · Qr,s = Ir
Income Ir = wr · L̄r + ρr · K̄r + Tr, where Tr is tariff revenue rebated lump-sum.

Equilibrium conditions

(i) Zero profits in each (r, s). (ii) Goods market clearing: Yr,s = Σr′ Xr′,s,r + intermediates. (iii) Factor markets: Σs Lr,s = L̄r,   Σs Kr,s = K̄r. (iv) Household budget binds. (v) Tariff revenue identity. The solver iterates on prices { Pr,s, wr, ρr } until excess demands fall below 10−6.