A Norwegian Regional General Equilibrium Modelling System NoReg

NOREG 2 is a Spatial Computable General Equilibrium (SCGE) model on data from Norwegian counties and municipalities. The model integrates the traditional applied general equilibrium framework, which has been employed in Norwegian economic planning since the 1960s, with regional modeling at the municipal level. The model is currently available in version is 2.3. Within the research project A Regional General Equilibrium Modelling System, NOREG 2 is being incrementally developed through various research and development tasks. Notably, version 2.3 introduces updated elasticity values for the substitution of production inputs in the model’s production functions, with these elasticity estimates being derived from Norwegian data on domestic industries. Depending on the analytical requirements, the model’s regional structure can be adjusted to different geographical scales, with municipalities serving as the smallest unit. Additionally, the model allows for a flexible sectoral division of the economy. NOREG 2 serves as a regional SCGE model designed to facilitate detailed regional or local analyses of the long-term economic impacts of policy measures within Norwegian counties and municipalities. By incorporating a geographical dimension, the model is particularly suited for scenario-based analyses of long-term economic challenges, including industrial and regional development, structural policy initiatives, policy changes, public interventions, or exogenous economic shocks. The model enables simulations of regional effects resulting from, for example, changes in taxes, tariffs, subsidies, transportation costs, regional development programs, or other targeted national or regional policies. Policymakers can utilize these simulations to evaluate the effectiveness of various policy options, identify potential unintended regional and national consequences, and enhance the precision of policy interventions by gaining a deeper understanding of how economic impacts may differ across regions.

The research project consists of three pillars: Pillar 1: We will develop a spatial computable general equilibrium (SCGE) model named NoReg 2.0 that builds on two existing SCGE-models for Norway: PINGO and NOREG. The model will be operational less than one year after project start and will form the platform for further studies. It will forecast employment, production, value added, use of capital, migration, demography education etc for 25 sectors and 89 separate Norwegian regions (NUTS 4). Through the 10-year period (5+5) we will gradually improve this model by integrating sub-models and empirical insights that are developed under pillar 2. We will publish an annual NoReg-report with updated regional forecasts and policy simulations at national and local levels. Pillar 2: We will conduct frontier research that will develop and expand the model over time. There are 6 projects under this pillar: 1) a consistent regional structure based on national accounting rules. 2) interregional migration, labour market mobility and immigration. 3) a detailed and relevant module of the public sector for regional activity studies. 4) the regional effects of downscaling the petroleum sector. 5) how traveling distances and agglomeration affects regional productivity growth in the model. 6) design a dynamic model structure based on forward looking consumers and firms. All projects are will lead to an updated version of NoReg. Pillar 3: We will create a vital, open and user-based forum that allows users to understand, operate and interpret the model. The forums will also function as a guide in the further model development. We plan to establish a web page (www.noreg2.no) where publications, new model versions, meetings, new insights and discussions are published online. In Pillar 3 we will design a user platform that allows users to simulate on their own on the web-page. We will also offer a help service for registered users to ensure that the model is used and understood properly.