Capital and labour markets - COFFEE-TEA

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Alert-warning.png Note: The documentation of COFFEE-TEA is 'under review' and is not yet 'published'!
Model Documentation - COFFEE-TEA
Corresponding documentation
Model information
Institution UFRJ (COPPE UFRJ), Brazil,
main users: Roberto Schaeffer; Alexandre Szklo; Andre F. P. Lucena; Angelo C. Gurgel; Pedro R. R. Rochedo; Mariana Imperio; Bruno S. L. Cunha; Rafael Garaffa
Solution concept
Solution method

In the TEA model, the macroeconomic closure assumes full employment of the factors of production (capital and labour). Savings equals investment in the general equilibrium, but regionally the imbalances are closed by a surplus (or deficit) in the current account. An endogenous real exchange rate clears the current accounts and the capital account decreases exougenously in the long-run. Capital stock evolves at each period with the formation of new capital that depends on the investment level in that period and the capital depreciation rate, as described in Equation 1.

where: is the capital stock in region r and time t; is the investment in new capital goods in region r and time t; is the depreciation rate of capital in region r.

In the COFFEE model, capital and labour are represented throught technological parameters, such as capital expenditures (CAPEX) and operational and maintenance expenditures (OPEX).