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Demand-Driven Structural Change in Applied General Equilibrium Models

Roberto Roson () and Dominique van der Mensbrugghe ()

No 96, IEFE Working Papers from IEFE, Center for Research on Energy and Environmental Economics and Policy, Universita' Bocconi, Milano, Italy

Abstract: This study analyzes the variations in industrial structure induced by income-sensitive patterns of final consumption, and how these changes can be captured by a multi-sector numerical model with a flexible demand system. We focus, in particular, on the estimation of parameters for an AIDADS (An Implicitly, Directly Additive Demand System) specification. We then test the latter by inserting it in the ENVISAGE global general equilibrium dynamic model, which is run under the SSP2 scenario from 2011 to 2050. It is found that time-varying income elasticity can generate sizable variations in the industrial structure. This finding has important practical implications, particularly when structural models are applied at a medium and long term horizon.

Keywords: Demand systems; structural change; economic dynamics; computable general equilibrium models. (search for similar items in EconPapers)
JEL-codes: C33 C68 D58 E21 O11 O41 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-mac and nep-ore
Date: 2017
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