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== Modelling economic growth ==


=== An exogenous growth engine composed of demography and labour productivity growth ===
In IMACLIM-R model population growth is taken from exogenous demographic trends (by default, UN World Population Prospects, medium scenario, United Nations, 2005)[[CiteRef::united2005world]].
 
The IMACLIM-R model growth engine is composed of exogenous demographic trends (by default, UN World Population Prospects, medium scenario, United Nations, 2005) and exogenous trends in labor productivity, as proposed in Solow?s neoclassical model of economic growth (Solow 1956). 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) and two empirical analyses on economic convergence, one investigating the past trends by Maddison (1995), and another one by Martins and al. (2005) 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 the leader?s 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), 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 results 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 therefore 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.

Latest revision as of 16:55, 29 September 2016

Model Documentation - IMACLIM

    Corresponding documentation
    Previous versions
    Model information
    Model link
    Institution Centre international de recherche sur l'environnement et le développement (CIRED), France, http://www.centre-cired.fr., Societe de Mathematiques Appliquees et de Sciences Humaines (SMASH), France, http://www.smash.fr., École Nationale des Ponts et Chaussées (ENPC), France, https://ecoledesponts.fr/., Centre National de la Recherche Scientifique (CNRS), France, https://www.cnrs.fr/fr., AgroParisTech (AgroParisTech), France, https://www.agroparistech.fr/., Centre de coopération International en Recherche Agronomique pour le Développement (CIRAD), France, https://www.cirad.fr/.
    Solution concept General equilibrium (closed economy)
    Solution method SimulationImaclim-R is implemented in Scilab, and uses the fonction fsolve from a shared C++ library to solve the static equilibrium system of non-linear equations.
    Anticipation Recursive dynamics: each year the equilibrium is solved (system of non-linear equations), in between two years parameters to the equilibrium evolve according to specified functions.

    In IMACLIM-R model population growth is taken from exogenous demographic trends (by default, UN World Population Prospects, medium scenario, United Nations, 2005)united2005world.

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