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Modelling the world economy at the 2050 horizon

  • Jean Fouré
  • Agnès Bénassy-Quéré
  • Lionel Fontagné

Economic 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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Article provided by The European Bank for Reconstruction and Development in its journal Economics of Transition.

Volume (Year): 21 (2013)
Issue (Month): 4 (October)
Pages: 617-654

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Handle: RePEc:bla:etrans:v:21:y:2013:i:4:p:617-654
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