# Constructing a Region DSGE Model with Institutional Features of Territorial Development

^{*}

## Abstract

**:**

## 1. Introduction

## 2. Literature Review

#### 2.1. DSGE Method in Regional Development Research

#### 2.2. Accounting for Heterogeneity of Regions

#### 2.3. Innovations

## 3. DSGE Model Method

#### 3.1. Household sector

#### 3.2. Real Sector

#### 3.3. Budget Sector

- labor supply and consumption by increasing the number of households ${N}_{t}$ (by reducing mortality, including those of working age), as well as by reducing morbidity and increasing their life expectancy;
- total factor productivity ${A}_{t}$. In particular, labor productivity increases with the development of education and science, and the growth of acquired knowledge, skills, and abilities.

#### 3.4. Relationship between Regions

## 4. Linearization and Calibration

#### 4.1. System of Linearized Equations

#### 4.2. Calibration Parameters

## 5. Simulation Results

## 6. Discussion

## Author Contributions

## Funding

## Data Availability Statement

## Acknowledgments

## Conflicts of Interest

## References

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**Figure 1.**Growth of the share of budget spending on human capital in the first region and the total budget spending on human capital.

Parameter | Value |
---|---|

Discount rate | $\beta =0.926$ |

Elasticity of intertemporal substitution of consumption | $\sigma =4$ |

Inverse elasticity of labor supply | $\phi =3$ |

Labor elasticity of GRP | $\alpha =0.55$ |

Capital depreciation rate | $\mu =0.1$ |

Basic personal income tax rate | $\overline{{\tau}_{INC}}=0.13$ |

Basic income tax rate | $\overline{{\tau}_{\mathsf{\u041f}}}=0.2$ |

Average share of budget spending on human capital | $\overline{wh}=0.411$ |

Elasticity of migration by wage difference | $lm=0.116$ |

Elasticity of capital movement with respect to interest arbitrage | $km=0.05$ |

Share of household consumption in GRP | ${\omega}_{C}=0.556$ |

Share of exports in GRP | ${\omega}_{E}=0.273$ |

Share of investment in GRP | ${\omega}_{I}=0.23$ |

Share of budget expenditures in GRP | ${\omega}_{G}=0.182$ |

Share of imports in GRP | ${\omega}_{Z}=0.205$ |

The share of personal income tax in the regional budget | ${\omega}_{INC}=0.42$ |

Share of income tax in the regional budget | ${\omega}_{\mathsf{\u041f}}=0.44$ |

The share of property taxes in the regional budget | ${\omega}_{K}=0.14$ |

The ratio of firms’ payments for interest payments and for property taxes | ${\omega}_{r}=0.5$ |

Elasticity of consumption and employment with budget expenditures for the human development sectors | $ef{f}_{H}=0.3$ |

Elasticity of total factor productivity with respect to budget spending on human development sectors | $ef{f}_{E}=0.1$ |

y1 | y2 | L1 | L2 | w1 | w2 | i1 | i2 | g1 | g2 | |
---|---|---|---|---|---|---|---|---|---|---|

e_ad | 0.56 | 0.005 | 0.8 | 0.04 | −0.27 | −0.035 | −1.25 | 0.8 | 0.5 | 0.004 |

w_h | −0.27 | 0.09 | −0.6 | 0.125 | 0.3 | −0.04 | −1.3 | −0.3 | −0.22 | 0.082 |

t_inc | 0.05 | 0.035 | −0.15 | 0.05 | 0.1 | −0.015 | −0.8 | 0.12 | 0.36 | 0.03 |

t_П | −0.3 | −0.025 | −0.4 | −0.07 | −0.85 | 0.04 | −1.2 | −0.27 | −0.25 | −0.016 |

t_k | −0.25 | −0.04 | −0.35 | −0.1 | −0.15 | 0.06 | −1.5 | −0.6 | −0.8 | −0.026 |

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**MDPI and ACS Style**

Dubrovskaya, J.; Shults, D.; Kozonogova, E.
Constructing a Region DSGE Model with Institutional Features of Territorial Development. *Computation* **2022**, *10*, 105.
https://doi.org/10.3390/computation10070105

**AMA Style**

Dubrovskaya J, Shults D, Kozonogova E.
Constructing a Region DSGE Model with Institutional Features of Territorial Development. *Computation*. 2022; 10(7):105.
https://doi.org/10.3390/computation10070105

**Chicago/Turabian Style**

Dubrovskaya, Julia, Dmitriy Shults, and Elena Kozonogova.
2022. "Constructing a Region DSGE Model with Institutional Features of Territorial Development" *Computation* 10, no. 7: 105.
https://doi.org/10.3390/computation10070105