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Characterizing Supply-Side Drivers of Structural Change in the Construction of Economic Baseline Projections

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  • Jean Chateau
  • Erwin Corong
  • Elisa Lanzi
  • Caitlyn Carrico
  • Jean Fouré
  • David Laborde

Abstract

A recent review of common modelling practices conducted during the Workshop �Shaping long-term baselines with Computable General Equilibrium (CGE) models� held at OECD in January 2018 showed that models include different assumptions on changes to the production function along their dynamic baselines. These changes imply shifts in sectoral compositions for the projected economies (i.e. structural change). This paper reviews the assumptions made by 24 modeling teams about supply-side drivers of structural change: primary factor efficiency and changes in input-output structures of the production function over time. We critically review various methodologies, identifying state-of-the-art practices, and we propose simple guidelines, particularly focusing on consistency between data sources and models. The review highlights that most models take into account structural change to some extent. However, more effort is needed in modelling projected changes in input-output structures. Furthermore, this review is helpful for understanding the functioning of dynamic CGE models and in assisting dynamic CGE modelers in building their own baselines

Suggested Citation

  • Jean Chateau & Erwin Corong & Elisa Lanzi & Caitlyn Carrico & Jean Fouré & David Laborde, 2020. "Characterizing Supply-Side Drivers of Structural Change in the Construction of Economic Baseline Projections," Journal of Global Economic Analysis, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University, vol. 5(1), pages 109-161, June.
    • Handle: RePEc:gta:jnlgea:v:5:y:2020:i:1:p:109-161
    DOI: http://dx.doi.org/10.21642/JGEA.050104AF
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    2. Clora, Francesco & Yu, Wusheng, 2022. "GHG emissions, trade balance, and carbon leakage: Insights from modeling thirty-one European decarbonization pathways towards 2050," Energy Economics, Elsevier, vol. 113(C).
    3. Paul Gretton, 2022. "National and Sectoral Effects of a Decline in the Desirability of Investing in Australia," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 55(1), pages 91-121, March.
    4. Jean Foure & Angel Aguiar & Ruben Bibas & Jean Chateau & Shinichiro Fujimori & Julien Lefevre & Marian Leimbach & Luis Rey-Los-Santos & Hugo Valin, 2020. "Macroeconomic Drivers of Baseline Scenarios in Dynamic CGE models: Review and Guidelines Proposal," Journal of Global Economic Analysis, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University, vol. 5(1), pages 28-62, June.
    5. Zhang, Jinbo & Liu, Lirong & Xie, Yulei & Han, Dengcheng & Zhang, Yang & Li, Zheng & Guo, Huaicheng, 2023. "Revealing the impact of an energy–water–carbon nexus–based joint tax management policy on the environ-economic system," Applied Energy, Elsevier, vol. 331(C).
    6. Winchester, Niven & White, Dominic, 2022. "The Climate PoLicy ANalysis (C-PLAN) Model, Version 1.0," Energy Economics, Elsevier, vol. 108(C).

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