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Modelling Consumption and Constructing Long-Term Baselines in Final Demand

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  • Mun Ho
  • Wolfgang Britz
  • Ruth Delzeit
  • Florian Leblanc
  • Roberto Roson
  • Franziska Schuenemann
  • Matthias Weitzel

Abstract

Modelling and projecting consumption, investment and government demand by detailed commodities in CGE models poses many data and methodological challenges. We review the state of knowledge of modelling consumption of commodities (price and income elasticities and demographics), as well as the historical trends that we should be able to explain. We then discuss the current approaches taken in CGE models to project the trends in demand at various levels of commodity disaggregation. We examine the pros and cons of the various approaches to adjust parameters over time or using functions of time and suggest a research agenda to improve modelling and projection. We compare projections out to 2050 using LES, CES and AIDADS functions in the same CGE model to illustrate the size of the differences. In addition, we briefly discuss the allocation of total investment and government demand to individual commodities.

Suggested Citation

  • Mun Ho & Wolfgang Britz & Ruth Delzeit & Florian Leblanc & Roberto Roson & Franziska Schuenemann & Matthias Weitzel, 2020. "Modelling Consumption and Constructing Long-Term Baselines in Final Demand," Journal of Global Economic Analysis, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University, vol. 5(1), pages 63-108, June.
    • Handle: RePEc:gta:jnlgea:v:5:y:2020:i:1:p:63-108
    DOI: http://dx.doi.org/10.21642/JGEA.050103AF
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    More about this item

    Keywords

    Consumption demand systems; Long-term baseline; CGE models;
    All these keywords.

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models

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