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WP IMACLIM-R
I
MACLIM
-R
A modeling framework for sustainable development issues
Renaud C
RASSOUS
, Jean-Charles H
OURCADE
, Olivier S
ASSI
, Vincent G
ITZ
,
Sandrine M
ATHY
,

Meriem H
AMDI
-C
HERIF

*
#






April 2006


*
CIRED - Centre International de Recherche sur lEnvironnement et le Développement
45 bis avenue de la Belle Gabrielle
94736 Nogent sur Marne Cedex
contact : crassous@centre-cired.fr
#
The development of this modeling architecture benefited from the early participation of Philippe Ambrosi
and from the development of I
MACLIM
-S

by Frédéric Ghersi.


Contents
CONTENTS ...................................................................................................... 3
RATIONALE OF THE IMACLIM-R MODELING BLUEPRINT............... 5
TECHNICAL DESCRIPTION ........................................................................ 8
A.

Static Equilibrium ............................................................................................................ 11

1.

Households demand of goods, services and energy ....................................................................11

1.1.

Income and savings.....................................................................................................................11

1.2.

Utility function.............................................................................................................................11

1.3.

Maximization program ...............................................................................................................12

2.

Governments ....................................................................................................................................13

3.

Purchase of goods for building productive capacities.................................................................14

4.

Production constraints and supply curves ....................................................................................14

5.

Market mechanisms and equilibrium constraints.........................................................................16

5.1.

Labor market................................................................................................................................16

5.2.

Goods markets and international trade ....................................................................................17

5.3.

International capital flows..........................................................................................................21

B.

Dynamic Linkages: Growth engine and technical change ............................................. 23

6.

Demographic trends and overall labor productivity....................................................................23

7.

Capacity, Infrastructures and equipments.....................................................................................24

7.1.

Productive capacity expansions ................................................................................................24

7.2.

Transportation infrastructures...................................................................................................25

7.3.

Households equipments.............................................................................................................26

8.

Energy-related technical change.....................................................................................................27

8.1.

Supply of energy..........................................................................................................................27

8.2.

Demand of Energy......................................................................................................................29

APPENDIX A: EQUATIONS OF THE STATIC EQUILIBRIUM ..............31
APPENDIX B: REFERENCES...................................................................... 35
APPENDIX C: MAIN FEATURES OF THE BASELINE SCENARIO...... 37
LEVELS ........................................................................................................... 39



- 4 -
Rationale of the I
MACLIM
-R modeling
blueprint

or economic modelers, the feverishness in the demands for studying sustainability issues
represents an exciting challenge: how can we put some rationale in public debates in spite of
the uncertainty surrounding the unprecedented time horizons necessary to understand
whether, when and why certain development pathways may be proven unsustainable?
F

This challenge led to the concept of integrated modeling (Weyant et al., 1996). Issues like
climate change, energy transition, energy security, food security, migration, cannot indeed be
responded to without embarking in economic models information coming from demography,
engineering sciences and natural sciences at various scale levels. In the same way, it is increasingly
demanded to account for lessons from other social sciences about the institutional determinants of
private and collective economic behaviors.

Scientifically, the main difficulty is how to integrate in a consistent manner such diverse,
fragile and controversial information from many different disciplinary fields. But this challenge
cannot be tackled without a prior clarification of three sources of long-standing controversies
between economists and specialists of other disciplines and amongst economic modelers
themselves whenever they deal with long term studies:
- the bottom-up vs. top-down debate which relates to the gap between the engineering view
of technology and its description by economists;
- the interpretation of the concepts of general equilibrium and of equilibrated growth
pathways: analytically very powerful, these notions are often suspected to be ideologically biased by
non-economists and even some economists;
- the assumption of rational expectations vs. the consideration of myopic behaviors,
information asymmetry and decision routines in given institutional contexts.

Motivated by lessons of a three-decennial involvement of the CIRED on energy-
environment and development issues, the primary aim of I
MACLIM
-R is to provide a common
language to avoid that these legitimate controversies constitute an obstacle to the efficacy of
modelers contribution to public decision. To do so, I
MACLIM
-R

follows a modeling blueprint
supported by three major principles:

First, to be based on an explicit description of the economy both in money metric values
and in physical quantities linked by a price vector, so as to ensure that long run simulations are


- 5 -
based on a consistent and plausible future physical world. This dual vision of the economy, which
comes back to the inspiration of the Arrow-Debreu axiomatic, is a precondition to guarantee that
the projected economy is supported by a realistic technical background, or, conversely, that any
projected vision of the technical systems corresponds to realistic economic flows and sets of
relative prices.
Second to be capable to incorporate information from sector based analysis about how
final demand and technical systems can be transformed by various sets of economic incentives for
very large departures from the reference scenario. This information can be applied to physical
variables corresponding to those of top-down models under provision of appropriate aggregations.
It incorporates (i) engineering based analysis about these technical systems including economies of
scale, learning by doing mechanisms and saturations in efficiency progress that may occur at any
given time horizons; (ii) explicit views about the efficiency of alternative incentive systems, on the
rationality of economic behaviours and on the pre-existence of market and institutional
imperfections.
Third to model a growth engine fueled by the investment/consumption ratio but the
functioning of which is governed by (i) structural changes explicitly dependent on consistent pictures
of the interplay between consumption styles, technology and land-use patterns
1
; (ii) overall productivity
driven by endogenous growth mechanisms; (iii) investments decisions function of expected profits at
each point in time and which, in case of imperfect expectations and technical inertia, generate
second best growth pathways; (iv) trade patterns and international capital flows which depend on
assumptions about the future organization of world markets.

The fundamental methodological choice made in I
MACLIM
-R and which explains its
structure is that this blueprint imposes to overcome difficulties stemming from the usual
production functions. These functions indeed are critical for the dialogue between engineers and
economists and for the description of the economic engine itself over the long run.

According to (Berndt and Wood, 1975) and (Jorgenson, 1981), KLE or KLEM production
functions were admitted to mimic the real set of available techniques in macroeconomic models
and, by paralipsis, the technical constraints impinging upon an economy. Whatever their
specifications, these functions are calibrated on cost-shares data and the Shepard's lemma is used to
reveal their parameters by duality. Beyond and independently