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

Lionel Fontagné and Jean Fouré

No 425, Development Working Papers from Centro Studi Luca d'Agliano, University of Milano

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.

Keywords: Growth; Macroeconomic Projections; Dynamic Baselines (search for similar items in EconPapers)
JEL-codes: E23 E27 F02 F17 F47 (search for similar items in EconPapers)
Pages: 68
Date: 2017-02-24
New Economics Papers: this item is included in nep-cmp, nep-ene, nep-int and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:csl:devewp:425

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