Ronald Jones's duality analysis as a foundation for applied general‐equilibrium modeling

• Published date: 01 March 2021
• Date: 01 March 2021
• DOI: http://doi.org/10.1111/ijet.12262
• Author: James R. Markusen

Int J Econ Theory. 2021;17:6–19.wileyonlinelibrary.com/journal/ijet6

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© 2020 IAET

DOI: 10.1111/ijet.12262

ORIGINAL ARTICLE

Ronald Jones's duality analysis as a foundation

for applied general‐equilibrium modeling

James R. Markusen

1,2

1

Department of Economics, University of

Colorado, Boulder, Colorado

2

Hitotsubashi Institute for Advanced Study,

Hitotsubashi University, Tokyo, Japan

Correspondence

James R. Markusen, Department of

Economics, University of Colorado,

Boulder, CO 80309‐0256.

Email: james.markusen@colorado.edu

Abstract

Ronald Jones made seminal contributions to general‐

equilibrium theory, moving away from an emphasis

on the existence of equilibrium to algebraic for-

mulations which enabled us to characterize key re-

lationships between parameters and variables, such

as that between tariffs and domestic factor prices and

welfare. But the analysis remained limited in value

for policy evaluation: the analysis was local, it pro-

vided only qualitative results, it was limited to very

small models, and strictly interior solutions had to be

assumed. The contribution of this paper is largely

pedagogic and methodological. I show how the tools

and approach pioneered by Jones can be generalized

via the use of duality, complementarity and the

Karush–Kuhn–Tucker theorem into a global, quan-

titative analysis of large changes in high‐dimensional

models which also allows for regime changes and

corner solutions. I then show how the resulting

nonlinear complementarity problem directly trans-

lates into a numerical model using the General Al-

gebraic Modeling System (GAMS).

KEYWORDS

complementarity, corner solutions, duality, global comparative

statics, KKT conditions

JEL CLASSIFICATION

F23; D50; D58

Prepared for a special issue of the International Journal of Economic Theory in honor of Ronald W. Jones.