Economics of Endogenous Technical Change in CGE Models - The Role of Gains from Specialization

CER-ETH (Center of Economic Research at ETH Zurich) Working Paper No. 10/130

33 Pages Posted: 28 Aug 2010

See all articles by Florentine Schwark

Florentine Schwark

ETH Zürich - CER-ETH - Center of Economic Research at ETH Zurich

Date Written: June 2010

Abstract

Computable general equilibrium models simulate the reaction of industries on carbon taxes. Their results differ strongly on the assumption of the underlying technologies. This paper compares two models and emphasizes the differences between their approaches to technology. The first model is the CITE model, which is the first model with endogenous growth based on gains from specialization so that growth dynamics result from investment incentives. The second model is a model with exogenous growth of endowments, which is the basis for many other CGE models. The results show that the CITE model unveils dynamics that cannot be obtained with the model based on exogenous growth. Reactions are stronger in the CITE model and industries need more time to approach the new balanced growth path.

Keywords: Endogenous growth, gains from specialization, CGE models, energy policy

JEL Classification: Q54, C63, O41, Q43, Q56

Suggested Citation

Schwark, Florentine, Economics of Endogenous Technical Change in CGE Models - The Role of Gains from Specialization (June 2010). CER-ETH (Center of Economic Research at ETH Zurich) Working Paper No. 10/130, Available at SSRN: https://ssrn.com/abstract=1666766 or http://dx.doi.org/10.2139/ssrn.1666766

Florentine Schwark (Contact Author)

ETH Zürich - CER-ETH - Center of Economic Research at ETH Zurich ( email )

Zürichbergstrasse 18
Zurich, 8092
Switzerland

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