There are many reasons why analysts may wish to investigate past economic outcomes.
The majority of these involve producing evidence that would allow economic agents to make
smarter decisions going forward. As a consequence, understanding the reasons for past
successes or failures, or identifying certain trends that are likely to persist in future have
always been sought after information.
In computable general equilibrium (CGE) modelling, historical simulations have become a
popular tool for estimating movements in factor productivity, technical change and
preference variables that are compatible with observed data at both an industry and macro
level. The primary aim of this paper is to provide some initial estimates for movements in
such variables for South Africa over the period 2007-2013 using the historical decomposition
methodology introduced in Dixon & Rimmer (2002). We focus, in particular, on movements
in the labour market and primary sector over this period. In conducting our quantitative
analysis, two further benefits emerge. The first is the identification of recent trends that may
be used to inform our baseline projections in policy work, and the second is the updating of
the model’s underlying supply-use database to improve the accuracy of policy simulation
results. The model used in this study is the dynamic version of the University of Pretoria
General Equilibrium Model (UPGEM).
The paper is set out as follows: Section 2 describes the UPGEM model in broad detail.
Section 3 describes how to find the appropriate model closure for our historical analysis and
summarizes the observed movements between 2007 and 2013. Section 4 presents the
results of the simulation and Section 5 draws some conclusions.