Modelling the world economy at the 2050 horizon
AbstractEconomic analysis is increasingly addressing long-term issues (such as global warming) that require a dynamic baseline for the world economy. In this article, we develop a three-factor (capital, energy, labour) macroeconometric (MaGE - Macroeconometrics of the Global Economy) model, and project growth for 147 countries to 2050. We improve on the literature by the following: (i) accounting for the energy constraint through dynamic modelling of energy productivity, (ii) modelling female participation rates consistent with education catch-up, (iii) departing from the assumptions of either a closed economy or full capital mobility (by applying a Feldstein-Horioka type relationship between saving and investment rates), and (iv) offering a fully consistent treatment of the Balassa-Samuelson effect. These innovative features have a sizeable impact on projected GDP.
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Bibliographic InfoArticle provided by The European Bank for Reconstruction and Development in its journal Economics of Transition.
Volume (Year): 21 (2013)
Issue (Month): 4 (October)
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