Demand-Driven Structural Change in Applied General Equilibrium Models

17 Pages Posted: 2 Oct 2017

See all articles by Roberto Roson

Roberto Roson

Ca Foscari University of Venice - Dipartimento di Economia; Bocconi University - IEFE Centre for Research on Energy and Environmental Economics and Policy; Loyola Andalucia University

Dominique van der Mensbrugghe

World Bank

Date Written: July 6, 2017

Abstract

This study analyzes the variations in industrial structure induced by income-sensitive patterns of final consumption, and how these changes can be captured by a multi-sector numerical model with a flexible demand system. We focus, in particular, on the estimation of parameters for an AIDADS (An Implicitly, Directly Additive Demand System) specification. We then test the latter by inserting it in the ENVISAGE global general equilibrium dynamic model, which is run under the SSP2 scenario from 2011 to 2050. It is found that time-varying income elasticity can generate sizable variations in the industrial structure. This finding has important practical implications, particularly when structural models are applied at a medium and long term horizon.

Keywords: Demand systems, structural change, economic dynamics, computable general equilibrium models

JEL Classification: C33, C68, D58, E21, O11, O41

Suggested Citation

Roson, Roberto and van der Mensbrugghe, Dominique, Demand-Driven Structural Change in Applied General Equilibrium Models (July 6, 2017). University Ca' Foscari of Venice, Dept. of Economics Research Paper Series No. 11/WP/2017, Available at SSRN: https://ssrn.com/abstract=3045157 or http://dx.doi.org/10.2139/ssrn.3045157

Roberto Roson (Contact Author)

Ca Foscari University of Venice - Dipartimento di Economia ( email )

Cannaregio 873
Venice, 30121
Italy
+39 041 2349147 (Phone)
+39 041 2349176 (Fax)

HOME PAGE: http://venus.unive.it/roson

Bocconi University - IEFE Centre for Research on Energy and Environmental Economics and Policy ( email )

viale Filippetti, 9
Milan, 20122
Italy

Loyola Andalucia University ( email )

Escritor Castilla Aguayo no. 4
Cordoba, CORDOBA 14004
Spain

Dominique Van der Mensbrugghe

World Bank ( email )

1818 H Street, N.W.
Washington, DC 20433
United States
202-473-0052 (Phone)
202-522-1159 (Fax)

HOME PAGE: http://econ.worldbank.org/staff/dvandermensbrugghe

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