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Value Added in Motion: Modelling World Trade Patterns at the 2035 Horizon

Author

Listed:
  • Lionel Fontagné

    (PSE (Paris 1) and CEPII)

  • Jean Fouré

    (CEPII)

Abstract

We address in this paper the future geography of production, migration and energy at the world level, and the consequences for the largest European countries. We take scant account of the wide range of possible evolutions of the world economy in terms of technological progress and diffusion, education, demography including migrations and finally energy price and efficiency. Taking a 2035 horizon, we examine how world trade patterns will be shaped by the changing comparative advantages, demand, and capabilities of different regions, and what will be the implications in terms of location of value added at the sector and country level. We combine a convergence model fitting three production factors (capital, labour and energy) and two factor-specific productivities, alongside a dynamic CGE model of the world economy calibrated to reproduce observed elasticity of trade to income. Each scenario involves three steps. First, we project growth at country level based on factor accumulation, demography and migration, educational attainment and efficiency gains, and discuss uncertainties related to our main drivers. Second, we impose this framework on the CGE baseline. Third, we implement trade policy scenarios (tariffs as well as non-tariff measures in goods and services), in order to get factor allocation across sectors from the model as well as demand and trade patterns.

Suggested Citation

  • Lionel Fontagné & Jean Fouré, 2017. "Value Added in Motion: Modelling World Trade Patterns at the 2035 Horizon," Development Working Papers 425, Centro Studi Luca d'Agliano, University of Milano.
    • Handle: RePEc:csl:devewp:425
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    References listed on IDEAS

    as
    1. Higgins, Matthew, 1998. "Demography, National Savings, and International Capital Flows," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(2), pages 343-369, May.
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    3. David Bloom & David Canning & Günther Fink & Jocelyn Finlay, 2009. "Fertility, female labor force participation, and the demographic dividend," Journal of Economic Growth, Springer, vol. 14(2), pages 79-101, June.
    4. Masson, Paul R & Bayoumi, Tamim & Samiei, Hossein, 1998. "International Evidence on the Determinants of Private Saving," The World Bank Economic Review, World Bank, vol. 12(3), pages 483-501, September.
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    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Fontagné, Lionel & Foure, Jean, 2017. "General Equilibrium in the Long Run: a Tentative Quantification of the SSP scenarios," Conference papers 332833, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.

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    More about this item

    Keywords

    Growth; Macroeconomic Projections; Dynamic Baselines;
    All these keywords.

    JEL classification:

    • E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production
    • E27 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Forecasting and Simulation: Models and Applications
    • F02 - International Economics - - General - - - International Economic Order and Integration
    • F17 - International Economics - - Trade - - - Trade Forecasting and Simulation
    • F47 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Forecasting and Simulation: Models and Applications

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