Construction of a database for a dynamic CGE model for South Africa

This paper describes the construction of database constructed for a dynamic CGE model for South Africa (hereafter SAGE). The starting point for creating a database for a CGE model are official data from an Input/output (IO) table, or from a Supply Use Table (SUT), or from a Social Accounting Matrix (SAM). Often the structure of the published data is not in the required format of a CGE database, and so a major task is to transform the official data into a form required by a CGE database. Four characteristics of the SAGE database are noted: 1. It contains information regarding the structure of the South African economy in the base year (2002). 2. It is the initial solution to the SAGE model. 3. It has the same basic structure as the ORANIG and MONASH databases. 4. The basic database is supplemented by additional data relating to dynamics. The database is organised in four parts. The first includes data on the coefficients that are computed from the input-output (IO) table. These coefficients represent the basic flows of commodities between users, commodity taxes paid by users, margin flows that facilitate the flow of commodities and valued added matrices. The second part of the SAGE database contains information on behavioural parameters. The elasticities influence the degree to which economic agents change their behaviour when relative prices change. The third part of the database contains information on government accounts, accounts with the rest of the world and industry-specific capital stocks and depreciation rates. The fourth part of this paper describes the tests undertaken to test for model validity. This paper is set out as follows: Section 1 describes the structure of the IO database. Section 2 reviews the official data sources used to create the IO database. Section 3 describes the steps taken to transform the official data into the correct format. Section 4 describes the elasticities and parameters adopted in for SAGE. Section 5 describes additional information regarding industry-specific capital stocks and government accounts. Section 6 describes various tests that were conducted to ensure that the database is balanced. The paper ends with a conclusion.