Capital and labour markets - IFs

Over the long run, investment and capital stocks in IFs are driving variables in an important positive (not equilibrating) feedback loop. As capital rises, it increases value added and GDP, increasing final demand and further increasing investment. Capital stock is a function of investment and depreciation rates; (although capital cohorts are not tracked). Endogenously determined investment can be influenced exogenously by a multiplier and the lifetime of capital can be changed in scenarios around technological advance. Similarly, government social investment can increase productivity, production and inventories in another positive feedback loop involving the productivity representation explained above and shown with equations. The partial equilibrium agriculture and energy models compute investment demand which is reconciled with demands for the other economic sectors in the general equilibrium model. The investment from the reconciliation is used in the partial equilibrium models to augment capital stocks (net of depreciation).

The labor force is computed based on the age-sex structure of the population model and the participation rate. The demand for labor by sector is computed in the economic model. The labor sub-model of the economic model reconciles labor supply and demand.