IGEM-PA

IGEM-PA is a variant of IGEM (Italian General Equilibrium Model), the large scale dynamic general equilibrium model for the Italian economy, entirely developed at the Department of the Treasury of the Italian Ministry of Economics and Finance and currently used as a simulation tool for economic policy analysis.

In IGEM-PA public capital is productivity-enhancing, while consumer preferences depend on goods and services provided by the government. In particular, public spending on private final and investment goods are used in conjunction with public employment by the public sector to produce goods and services. In other words, in this extension of IGEM the public sector is explicitly modelled as a supplier of goods and services.

This extension of IGEM is motivated by the fact that an intensive reform agenda urges economic institutions to quantify the macroeconomic impact of complex reform scenarios and a vast area of policy interventions regards the public sector. Notably, in a period of fiscal consolidation, ensuring efficiency in public procurement is of paramount importance to ensure sound public service delivery. In the same way, reducing red tape and enhancing productivity are essential priorities in times of hard budget constraints. This new variant of IGEM can be used to address the following economic policy questions. Which are the macroeconomic effects of the rationalization of public spending? Which are the implications of major advances in the implementation of the digital agenda? How do the simplification reforms impact on the economy when the PA sector is explicitly modeled? What happens if the overall productivity of the public sector increases?

In addition with IGEM-PA it is possible to undertake a fully-fledged analysis of fiscal multipliers, distinguishing between different categories of public expenditures (purchases of goods from the private sector, public employment, changes in public capital increasing the endowment of infrastructures of the economy).