Technological change - IFs

The general equilibrium economic model uses a Cobb-Douglas production function with a multifactor productivity (MFP) or total-factor productivity (TFP) term. The basic value of the technology term for each country/geopolitical region (r) is a sum of a global productivity growth rate driven by the economically advanced or leading country/region (by default the United States), a technological convergence factor dependent on GDP per capita, and an exogenous or scenario factor. In addition, however, other factors affect productivity growth over time. These include a wide range of variables across human (MFPHC), social (MFPSC), physical (MFPPC), and knowledge (MFPKN) capital categories that are computed using variables from other models of the hard-linked IFs system. For instance, years of adult education attainment and the level of economic freedom, respectively are among the variables that affect change in MFP associated with human and social capital. The production function thus constitutes an important linkage across the models in the IFs system.

Partial equilibrium models for agriculture and energy are fully integrated with the general equilibrium model. Productivity for those sectors is determined in those models using logics that represent knowledge advance, physical constraints, economic drivers, and model-used parametric assumptions.