Model W8-D
LIFEA Lodz Institute for Forecasting and Economic Analyses


Model Description

The key tool of quantitative analyses related to the project – the W8D model of the Polish economy – had to be extensively modified, updated and extended to successfully deal with a variety of issues concerning sustainable development. This is so because its previous version was elaborated to cover mainly economic aspects of growth (see The structure of the long-term W8D-2002 macroeconometric model of the Polish economy). To this end, the general idea of a new version the model has been conceptualized and appropriate methodologies described (see paper Modeling various aspects of sustainability. The case of Poland). In a nutshell, the main mechanisms underlying the structure of the new system might be depicted as follows. The core of the entire system rests on the initial version of the W8D model of the Polish economy, which to much extent affects the way the sustainability issues were treated. The central relation of the whole construction is a generalized production function comprising – apart from traditional production factors: built capital and labour force – human capital and endogenous technological progress. The human capital includes both education, learning by doing and health state of the labour force. To meet the requirements of such defined human capital measure one has to possess quite detailed information about the population by age structure. In the long-run it is also necessary to account for fertility. Life expectancy that stands for health indicator of the whole society influences labour productivity and is itself determined – among others - by economic, social and environmental factors. The standing of natural environment represented by air and water quality as well as by waste accumulation affects – among other things – life expectancy, and thus –indirectly – also labour productivity. Technological progress - associated in the model with total factor productivity - is a function of human capital, imported R&D, and science sector activity measured by a stock of accumulated patents. The individual blocks are in mutual, contemporaneous interlinks against one another, which is depicted in figure 1. The outlined system of simultaneous relationships touches upon what constitutes the essence of broadly understood sustainability - not limited to ecological questions only – from a macroeconomic perspective with some priority given to economic growth. For obvious reasons is not, and cannot be exhaustive. This is both because of the taken (macroeconomic and national) perspective and - more importantly – because of inappropriateness of traditional econometric approach to deal with such vital aspects of sustainability as valuation of biodiversity or intertemporal fairness. Still, it is worth emphasizing that even in this form, the model might prove useful in analyzing various socio-economic policy decisions. To broaden the range and of its possible applications and degree of comprehension, the W8D model will be connected to another model of the Polish economy IMPEC, based on input-output methodology. This will enable – amongst others - disaggregation of technological progress formation, economic activities and greenhouse gasses emission by sectoral or even branch breakdown. The W8D will be responsible for generating long-term, macro projections, whereas IMPEC – basing on the data generated by W8D – will disaggregate them – where possible - into sectoral or branch items.


Contact Persons

Wladyslaw Welfe
LIFEA
Sienkiewicza 73/3
PL-90057 Lodz, Poland
+48 (42) 635-5172
emfg@uni.lodz.pl


Waldemar Florczak
LIFEA
Sienkiewicza 73/3
PL-90057 Lodz, Poland
+48 (42) 635-5186
emfg@uni.lodz.pl


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