Macro-economy - AIM-Hub: Difference between revisions
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The future macro-economic assumption also causes changes in the supply of and demand for goods. The macroeconomic assumption is also an exogenous assumption. Usually, the change in GDP is used for the macroeconomic assumption for the Integrated Assessment Models? (IAMs') future scenario simulation. However, the actual outcome from the model is not exactly the same as the assumptions. Therefore, the GDP assumption is used to calculate the TFP, and the result is a totally exogenous parameter of the model.<br /> Economic growth is realized by three factors: changes in the labor force, accumulated capital, and the total factor of productivity. The labor force is the one of the three main drivers of GDP. Change in the labor force is an exogenous variable for this model. The production sectors are basically assumed to have a multi-nested CES function. Therefore, if the labor wage is constant, the labor force change ratio directly influences changes in the GDP.<br /> The GDP assumptions for the future scenarios are used in the scenario analysis, whereas GDP is endogenously determined in the CGE model. As mentioned previously, economic growth is realized by labor force, capital, and TFP. Thus, there are four degrees of freedom. Labor is exogenous, as indicated previously. Total capital accumulation is also determined a priori for a particular year because the total capital that is able to participate in production is the previous year?s capital formulation plus accumulation less depreciation. TFP is an unknown parameter. We use the GDP assumptions to calculate changes in TFP.<br /> Let the total labor, capital, and GDP be given, and the Hicks-neutral technical change be assumed. Then, the TFP annual change is determined as below.<br /> [[ | The future macro-economic assumption also causes changes in the supply of and demand for goods. The macroeconomic assumption is also an exogenous assumption. Usually, the change in GDP is used for the macroeconomic assumption for the Integrated Assessment Models? (IAMs') future scenario simulation. However, the actual outcome from the model is not exactly the same as the assumptions. Therefore, the GDP assumption is used to calculate the TFP, and the result is a totally exogenous parameter of the model.<br /> Economic growth is realized by three factors: changes in the labor force, accumulated capital, and the total factor of productivity. The labor force is the one of the three main drivers of GDP. Change in the labor force is an exogenous variable for this model. The production sectors are basically assumed to have a multi-nested CES function. Therefore, if the labor wage is constant, the labor force change ratio directly influences changes in the GDP.<br /> The GDP assumptions for the future scenarios are used in the scenario analysis, whereas GDP is endogenously determined in the CGE model. As mentioned previously, economic growth is realized by labor force, capital, and TFP. Thus, there are four degrees of freedom. Labor is exogenous, as indicated previously. Total capital accumulation is also determined a priori for a particular year because the total capital that is able to participate in production is the previous year?s capital formulation plus accumulation less depreciation. TFP is an unknown parameter. We use the GDP assumptions to calculate changes in TFP.<br /> Let the total labor, capital, and GDP be given, and the Hicks-neutral technical change be assumed. Then, the TFP annual change is determined as below.<br /> [[File:38469886.png]],<br /> where<br /> tfpr is the TFP change ratio with the previous year in region r,<br /> gdpr is the expected GDP assumptions in region r,<br /> Lr is the total labor participation in region r, and<br /> Kr is the total accumulated capital in region r.<br /> The CES function is used for the function F. The TFP change ratio derived from the above equation is multiplied to the all sectors. This TFP change calculation is made only for the scenario excluding climate mitigation (i.e., the Business as Usual (BaU) scenario), and the scenarios with climate change mitigation adopt the BaU changes in TFP for the scenario under the same socioeconomic assumptions. | ||
Revision as of 16:31, 23 August 2016
| Corresponding documentation | |
|---|---|
| Previous versions | |
| Model information | |
| Model link | |
| Institution | National Institute for Environmental Studies (NIES), Japan, https://www.nies.go.jp/index-e.html., Kyoto-University (Kyoto-University), Japan, https://www.kyoto-u.ac.jp/en. |
| Solution concept | General equilibrium (closed economy) |
| Solution method | Simulation |
| Anticipation | |
The future macro-economic assumption also causes changes in the supply of and demand for goods. The macroeconomic assumption is also an exogenous assumption. Usually, the change in GDP is used for the macroeconomic assumption for the Integrated Assessment Models? (IAMs') future scenario simulation. However, the actual outcome from the model is not exactly the same as the assumptions. Therefore, the GDP assumption is used to calculate the TFP, and the result is a totally exogenous parameter of the model.
Economic growth is realized by three factors: changes in the labor force, accumulated capital, and the total factor of productivity. The labor force is the one of the three main drivers of GDP. Change in the labor force is an exogenous variable for this model. The production sectors are basically assumed to have a multi-nested CES function. Therefore, if the labor wage is constant, the labor force change ratio directly influences changes in the GDP.
The GDP assumptions for the future scenarios are used in the scenario analysis, whereas GDP is endogenously determined in the CGE model. As mentioned previously, economic growth is realized by labor force, capital, and TFP. Thus, there are four degrees of freedom. Labor is exogenous, as indicated previously. Total capital accumulation is also determined a priori for a particular year because the total capital that is able to participate in production is the previous year?s capital formulation plus accumulation less depreciation. TFP is an unknown parameter. We use the GDP assumptions to calculate changes in TFP.
Let the total labor, capital, and GDP be given, and the Hicks-neutral technical change be assumed. Then, the TFP annual change is determined as below.
,
where
tfpr is the TFP change ratio with the previous year in region r,
gdpr is the expected GDP assumptions in region r,
Lr is the total labor participation in region r, and
Kr is the total accumulated capital in region r.
The CES function is used for the function F. The TFP change ratio derived from the above equation is multiplied to the all sectors. This TFP change calculation is made only for the scenario excluding climate mitigation (i.e., the Business as Usual (BaU) scenario), and the scenarios with climate change mitigation adopt the BaU changes in TFP for the scenario under the same socioeconomic assumptions.