Economic activity - IMACLIM - Revision history

Celine Guivarch at 15:58, 29 September 2016

2016-09-29T15:58:17Z

← Older revision		Revision as of 17:58, 29 September 2016
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	=== An exogenous growth engine composed of demography and labour productivity growth ===		=== An exogenous growth engine composed of demography and labour productivity growth ===

	The IMACLIM-R model growth engine is composed of exogenous demographic trends (~~see~~ section on ~~PopulationXXX~~) and exogenous trends in labor productivity, as proposed in Solow's neoclassical model of economic growth (Solow 1956)[[CiteRef::solow1956contribution]]. To build these labor productivity trends we draw on stylized facts from the literature, in particular the convergence assumption (Barro and Sala-i-Martin 1992)[[CiteRef::barro1992convergence]] and two empirical analyses on economic convergence, one investigating past trends by Maddison (1995)[[CiteRef::maddison1995monitoring]], and another by Martins and al. (2005)[[CiteRef::oliveira2005impact]] looking at future trends. In the default parameterization of the model, we retain a 'leader', the US, whose labor productivity growth trend lies between 2% in the short run and 1.65% in the long run. The trends in labor productivity of the other regions catch up with that of the leader over time, i.e. their growth in labor productivity is higher the further their level of absolute labor productivity is from the leader's. All sectors within one region exhibit the same growth in labor productivity, while the respective initial levels are sector and region specific		The IMACLIM-R model growth engine is composed of exogenous demographic trends ([[Population_-_IMACLIM\|See section on Population]]) and exogenous trends in labor productivity, as proposed in Solow's neoclassical model of economic growth (Solow 1956)[[CiteRef::solow1956contribution]]. To build these labor productivity trends we draw on stylized facts from the literature, in particular the convergence assumption (Barro and Sala-i-Martin 1992)[[CiteRef::barro1992convergence]] and two empirical analyses on economic convergence, one investigating past trends by Maddison (1995)[[CiteRef::maddison1995monitoring]], and another by Martins and al. (2005)[[CiteRef::oliveira2005impact]] looking at future trends. In the default parameterization of the model, we retain a 'leader', the US, whose labor productivity growth trend lies between 2% in the short run and 1.65% in the long run. The trends in labor productivity of the other regions catch up with that of the leader over time, i.e. their growth in labor productivity is higher the further their level of absolute labor productivity is from the leader's. All sectors within one region exhibit the same growth in labor productivity, while the respective initial levels are sector and region specific

	The two sets of assumptions on demography and labor productivity growth describe natural growth (Phelps, 1961)[[CiteRef::phelps1961golden]], i.e. the growth rate that an aggregated one-sector economy would follow under full employment of factors of production.		The two sets of assumptions on demography and labor productivity growth describe natural growth (Phelps, 1961)[[CiteRef::phelps1961golden]], i.e. the growth rate that an aggregated one-sector economy would follow under full employment of factors of production.

Celine Guivarch at 15:54, 29 September 2016

2016-09-29T15:54:32Z

← Older revision		Revision as of 17:54, 29 September 2016
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	== Modelling economic growth - Realized GDP growth is endogenous ===		== Modelling economic growth ==

			=== An exogenous growth engine composed of demography and labour productivity growth ===

			The IMACLIM-R model growth engine is composed of exogenous demographic trends (see section on PopulationXXX) and exogenous trends in labor productivity, as proposed in Solow's neoclassical model of economic growth (Solow 1956)[[CiteRef::solow1956contribution]]. To build these labor productivity trends we draw on stylized facts from the literature, in particular the convergence assumption (Barro and Sala-i-Martin 1992)[[CiteRef::barro1992convergence]] and two empirical analyses on economic convergence, one investigating past trends by Maddison (1995)[[CiteRef::maddison1995monitoring]], and another by Martins and al. (2005)[[CiteRef::oliveira2005impact]] looking at future trends. In the default parameterization of the model, we retain a 'leader', the US, whose labor productivity growth trend lies between 2% in the short run and 1.65% in the long run. The trends in labor productivity of the other regions catch up with that of the leader over time, i.e. their growth in labor productivity is higher the further their level of absolute labor productivity is from the leader's. All sectors within one region exhibit the same growth in labor productivity, while the respective initial levels are sector and region specific

			The two sets of assumptions on demography and labor productivity growth describe natural growth (Phelps, 1961)[[CiteRef::phelps1961golden]], i.e. the growth rate that an aggregated one-sector economy would follow under full employment of factors of production.

			=== Realized GDP growth is endogenous ===

	In this multi-sectoral framework of Imaclim-R, with partial use of factors of production, the effective economic growth rate may depart from the exogenous natural growth rate trend. The structure and rate of realized growth are endogenously determined by: (i) the allocation of labor force across sectors, which is itself governed by the final demand of these sectors, and (ii) the evolution in unemployment rates, which also result from the final demand of these sectors and the constraints of installed productive capacities and their technical characteristics.		In this multi-sectoral framework of Imaclim-R, with partial use of factors of production, the effective economic growth rate may depart from the exogenous natural growth rate trend. The structure and rate of realized growth are endogenously determined by: (i) the allocation of labor force across sectors, which is itself governed by the final demand of these sectors, and (ii) the evolution in unemployment rates, which also result from the final demand of these sectors and the constraints of installed productive capacities and their technical characteristics.

	First, the twelve production sectors have different productivities, captured by unitary labor requirements for a unit of production. Therefore the effective labor productivity of the economy depends on the allocation of the labor force among production sectors. For instance, the overall productivity of labor increases through structural changes that favour the reallocation of labor towards highly productive sectors. In that case, realized economic growth can be higher than the natural growth rate. Second, exogenous labor productivity gains may not be transformed into actual growth if unemployment increases due to demand shortage or constraints on installed productive capacities.		First, the twelve production sectors have different productivities, captured by unitary labor requirements for a unit of production. Therefore the effective labor productivity of the economy depends on the allocation of the labor force among production sectors. For instance, the overall productivity of labor increases through structural changes that favour the reallocation of labor towards highly productive sectors. In that case, realized economic growth can be higher than the natural growth rate. Second, exogenous labor productivity gains may not be transformed into actual growth if unemployment increases due to demand shortage or constraints on installed productive capacities.

Celine Guivarch at 15:51, 29 September 2016

2016-09-29T15:51:06Z

← Older revision		Revision as of 17:51, 29 September 2016
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	\|DocumentationCategory=Economic activity		\|DocumentationCategory=Economic activity
	}}		}}

			== Modelling economic growth - Realized GDP growth is endogenous ===

			In this multi-sectoral framework of Imaclim-R, with partial use of factors of production, the effective economic growth rate may depart from the exogenous natural growth rate trend. The structure and rate of realized growth are endogenously determined by: (i) the allocation of labor force across sectors, which is itself governed by the final demand of these sectors, and (ii) the evolution in unemployment rates, which also result from the final demand of these sectors and the constraints of installed productive capacities and their technical characteristics.

			First, the twelve production sectors have different productivities, captured by unitary labor requirements for a unit of production. Therefore the effective labor productivity of the economy depends on the allocation of the labor force among production sectors. For instance, the overall productivity of labor increases through structural changes that favour the reallocation of labor towards highly productive sectors. In that case, realized economic growth can be higher than the natural growth rate. Second, exogenous labor productivity gains may not be transformed into actual growth if unemployment increases due to demand shortage or constraints on installed productive capacities.

Rineke Oostenrijk: 1 revision imported

2016-08-17T09:41:13Z

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Rineke Oostenrijk: Edited automatically from page IMACLIM setup.

2016-08-16T09:23:39Z

Edited automatically from page IMACLIM setup.

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