Analyzing the Effects of Technological Change: A Computable General Equilibrium Approach
Abstract
Analyzing the effects of technological changes occurring simultaneously in many sectors of the economy is most meaningfully approached via mathematical models constructed in a general equilibrium framework. In order to be suited to a study of technical change, an equilibrium model should be dynamic, have a long time horizon, and allow production to be disaggregated into a large number of sectors. The size of the resulting model, however, will place it beyond the capability of existing algorithms to solve, unless some special assumptions are made. This document describes a class of so-called computable general equilibrium models which have been suitably restricted in order to allow efficient computational implementation. An important example of this class is the PILOT model of the U.S. economy, which combines a process-oriented representation of production with a system of smooth consumer demand functions. Solutions of the PILOT model provide an internally consistent overall picture of the long-run consequences of technological change and of government policy and foreign market conditions in the context of technological change. The authors report the results of a study using PILOT to assess important differences between a high-tech and a low-tech economy, in terms of aggregate and sectoral patterns of growth, employment, and energy use over the next 25 years. The scenario analysis presented effectively illustrates the analytical advantages of the general equilibrium perspective.
Document Details
- Document Type
- Technical Report
- Publication Date
- Sep 01, 1988
- Accession Number
- ADA201849
Entities
People
- George Bernard Dantzig
- John C. Stone
- Patrick H. Mcallister
Organizations
- Stanford University