Industrial Economics and International Management
Integrating Innovation Into Computable General Equilibrium Models
Technological progress is a central determinant of international competitiveness and sustained, ecologically sound development. However, economic modelling of technological innovation and its impact in macroeconomic models as well as in computable general-equilibrium (CGE) models is not adequate.So far, technical progress is generally only incorporated into existing models by its results, e.g. changes in the production function or cost parameters. Product innovation which presents the bulk of innovation activities at the micro level is as a rule neglected in CGE models. In addition, those earlier development phases at the micro level, such as innovation and adaptation, are normally not explicitly analysed in macro or CGE models.CGE models are an important analytical tool for the preparation and support of economic policy decisions. Therefore, this project aims at narrowing the research gap in the area of modelling of (ecological and) technological progress. The main research target is to utilise existing theoretical and empirical research to adequately incorporate endogenous technological progress into CGE models. This approach recognises that technological knowledge is not exogenously given, but the endogenous result of other economic factors, some of which can be influenced by economic policy. The analysis involved is consequently much more complex than with a conventional approach (with exogenous technology) and a comprehensive empirical understanding of the underlying growth factors is not yet available.Development and implementation of empirically founded model specifications for endogenous (ecological and) technological progress aim at significantly improving the explanatory powers of the CGE models (GEM-E3, PACE) mainly in use at the ZEW.
Duration: 01.01.2003 - 31.12.2006