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GTAP Resource #5846

"Characterizing supply-side drivers of structural change in the construction of economic baseline projections"
by Chateau, Jean, Erwin Corong, Jean Fouré, David Laborde, Elisa Lanzi, Hans van Meijl and Roberto Roson

Economic growth, whether driven by primary factor growth (e.g., labour, capital) or overall technical progress, is historically characterized by changes in the sectoral composition of economies, i.e., structural change. Many factors explain why growth rates are not uniform across economic sectors and commodities. Non-homothetic preferences is a first explanation; they imply that, when income grows, households spend less on necessary goods like food products, and more on services. The second explanation is the varying degree of technological progress across sectors. This includes, differences in the efficiency of the different production inputs that drive structural change. For simplicity, in this paper we will refer to this as supply-side structural change. A final explanation for the different changes in sectoral composition of economies over time is that the world economy relies on international trade with trade specialization patterns that explain uneven rates of output growth and commodity demand across sectors.

The calibration process of macroeconomic projections –Gross Domestic Product (GDP) in particular -in the construction of a Computable General Equilibrium (CGE) model’s baseline scenario has no reason to imply that the proportion of each good consumed or produced is going to increase proportionally. Indeed many characteristics of CGE models imply endogenous structural change in the dynamic calibration process like non-homothetic preferences, uneven input cost structure across sectors associated with non-uniform commodity prices evolution, or exogenous assumptions on efficiency improvements of production factors, etc...

Resource Details (Export Citation) GTAP Keywords
Category: 2019 Conference Paper
Status: Published
By/In: Presented at the 22nd Annual Conference on Global Economic Analysis, Warsaw, Poland
Date: 2019
Created: Corong, E. (4/15/2019)
Updated: Corong, E. (4/15/2019)
Visits: 1,569
- Baseline development

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