Technological change - GEM-E3
|Model Documentation - GEM-E3|
|Institution||Institute of Communication And Computer Systems (ICCS)|
|Solution method||The model is formulated as a simultaneous system of equations with an equal number of variables. The system is solved for each year following a time-forward path. The model uses the GAMS software and is written as a mixed non-linear complementarity problem solved by using the PATH algorithm using the standard solver options.|
Technical progress is explicitly represented in the GEM-E3 in the production function, either exogenously or endogenously, depending on the R&D expenditure by private and public sector and taking into account spillovers effects. Technological progress is based on the myopic expectations of the participant agents. The production technology exhibits constant returns to scale. Firms supply their goods and select a production technology so as to maximise their profit within the current year, given the fact that they cannot change the stock of productive capital within this period of time. The stock of capital is fixed within the current year. Firms can change their stock of capital the following year, by investing in the current one.