This presentation is part of: E00-1 (1885) Macroeconomic Theory

A Long-Term Simulation Model for a Knowledge–Based Economy

Wladyslaw Welfe, Ph.D, Institut of Econometrics, University of Lodz, Rewolucji 1905 str. no 41, Lodz, 90-214, Poland

Development of market economies towards the economies based on knowledge implies the construction of new long-term macroeconometric models. The structure of the new long-term W8D  model for Poland is presented. Being a complete model, it covers the blocks of equations explaining final demand and the production process as well as financial flows. The equations explain both the long-term relationships and the dynamic adjustments using ECM. The model is of medium-size, including 235 equation, of which 111 are stochastic. They are mostly non-linear, dynamic and compose a simulations system.

The consumption and investment function estimates are shown. The paper discusses the notions of extended production function and total factor productivity (TFP). The TFP represents the impacts of new technologies being endogenized, as well as human capital. The discussion covers the measurement issues and explanation of the role of domestic and foreign R&D expenditures, as well as educational expenditures. The price and wages equations as well  as incomes explaining the expenditures close the model. The discussion is extended to include proposals to construct new submodels explaining the sectors of research and education and also the ICT industries, as well as the ecological issues.

Keywords: Knowledge economy, technical progress, production functions, total factor productivity, R&D expenditures, human capital


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