ABSTRACT

The empirical application of general equilibrium models can be traced back to 1960 when Johansen presented his multisectoral model for the Norwegian economy. Since the mid-seventies, the stream of Computable General Equilibrium (CGE) models has grown remarkably, which mainly can be attributed to the availability of faster and cheaper computers and to the renewed recognition of the importance of relative prices for the allocation of resources. CGE models proved to be very useful tools for the analysis of tax reforms, international trade, resource allocation and income distribution. The majority of CGE models are applied to developing countries, there are increasingly more applications to advanced countries as well. 1