Exploring Long Run Structural Change with a Dynamic General Equilibrium Model

30 Pages Posted: 25 May 2018  

Wolfgang Britz

University of Bonn

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

Date Written: May 20, 2018

Abstract

In this paper we present a computable general equilibrium model (G-RDEM), specifically designed for the generation of long run scenarios of economic development, featuring a non-homothetic demand system, endogenous saving rates, differentiated industrial productivity growth, interest payments on foreign debt and time-varying input-output coefficients. To the best of our knowledge, this is the first model of this kind. We illustrate how parameters of the five modules of structural change have been estimated, and we test the model by comparing its results with those obtained by a more conventional recursive dynamic CGE model. Both models are driven by the same GDP and population data, exogenously provided by the IPCC Shared Socio-economic Pathway 3. GDP levels determine the endogenous productivity parameters. Population affects the definition of per capita income, which in turn affects the household demand system and the variation of input-output coefficients. Information on the demographic structure is also employed to modify the aggregate saving rate parameters. It is found that the two models do produce different findings, both globally and at the regional and industrial level. Understanding the origins of such differences sheds some light on how mechanisms of structural change operate in the long run.

Keywords: Computable General Equilibrium models, Long-run economic scenarios, Structural change

JEL Classification: C68, C82, C88, D58, E17, F43, O11, O40

Suggested Citation

Britz, Wolfgang and Roson, Roberto, Exploring Long Run Structural Change with a Dynamic General Equilibrium Model (May 20, 2018). University Ca' Foscari of Venice, Dept. of Economics Research Paper Series No. 12/WP/2018 . Available at SSRN: https://ssrn.com/abstract=3184110 or http://dx.doi.org/10.2139/ssrn.3184110

Wolfgang Britz

University of Bonn ( email )

Nussallee 21, Haus 1, Raum 14
Postfach 2220
53113 Bonn
Germany
++ 49 - 2 28 - 73 29 12 (Phone)
++ 49 - 2 28 - 73 46 93 (Fax)

HOME PAGE: http://www.ilr.uni-bonn.de/em/staff/britz/britz_e.htm

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

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