Work Package 4: A comprehensive modelling framework
The objective of WP4 is to develop a functionality based macroeconomic framework, incorporating economic constraints, such as limited availability of capital, labour and an extended list of resources. The aim is a basic model that follows an Input-Output frame work but is enhanced by means of general equilibrium modelling in order to capture possible long-run effects. WP4 thus thrives developing an innovative modelling approach suitable for investigating long-term transformation processes.
Preparing the data base
The data sets from WP3 is prepared and structured in such a way, that they are compatible with available input-output tables in order to operationalize the acquired data within a macroeconomic framework.
The core model in an extended IO framework
Based on the links between functionalities, the stock-flow interactions and their resource use developed in WP3, we assign areas of the Input-Output-Table to the investigated functionalities. The IOT structure then is rearranged according to the provision of functionalities instead of final demand commodities as in conventional modelling. This core model is then extended by additional information on (sectoral) resource use.
Extending the core model
Means of computable general equilibrium modelling supplement the IOT framework. This allows for depicting economic feedbacks that follow from switching from one resource-bundle to another within a closed economic system and that is able to also capture relative price effects. Furthermore, the model is refined with respect to income groups and their respective level of labour skill endowment (high and low-skilled labour). This can be fruitfully used for transformation analysis in WP5.