Structural transformation replication and extrapolation by dynamical general equilibrium feedbacks

02/04/2019

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by   Satoshi Nakano, et al.

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We model sectoral production by serially nesting binary compounding processes. The sequence of processes is discovered in a self-similar hierarchical structure stylized in the macroscopic input-output transactions. The feedback system of unit cost functions, with recursively estimated nest-wise CES parameters, is calibrated for productivities to replicate two temporally distant cost share structures, observed in a set of linked input-output tables. We also model representative household by multifactor CES with parameters estimated by fixed effects regression. By the integrated dynamical general equilibrium model, we extrapolate potential structural transformations, and measure the associated welfare changes, issued by small exogenous sectoral productivity shocks.