18
H. Schlör et al.
without economic growth to analyse if such an economic world could reduce the CO 2 -
emissions as demanded by the IPCC [36] and the World Meteorological Organization
(WMO) [87] to limit global warming to 1.5 °C [36].
Addressing this controversial debate, the objective of our model is to contribute to
the discussion about the characteristics of a post-growth economy in which the FEW
nexus is embedded. Research has to address a number of growth-related questions:
1. Which effect will different growth scenarios have on emissions arising from
production and consumption?
2. Can an economic system be organized as a zero or de-growth economy within
a globalized economic growth system? And, if so, what are the national and
international economic consequences?
3. What effects will such a transformation have on occupation, utility, capital needs,
and the FEW nexus?
Based on these challenges, we derived a new, stylized model consisting of four
countries to discuss the effects of different growth scenarios on the various key
economic indicators.
4 A Four Country Dynamic Multinational CGE Model
Solow argues that his growth model is based on theoretical assumptions because “all
theory depends on assumptions which are not quite true. That is what makes it theory.
The art of successful theorizing is to make the inevitable simplifying assumptions
[72]” based on a realistic view on the economic development.
Hence, we start our analysis with the definition of our assumptions to approach
reality.
4.1 Introduction
We use a dynamic multinational general equilibrium model (GE model) based on
ECOMOD 2003. Similar models were used, for example, also by Bretschger [13].
The modelling approach was inspired by Kaldor [39] and is in line with the tradition
of the Arrow–Debreu model [7, 8], the latter of which was used to prove the existence
of equilibria [33].
There is no uncertainty or no money illusion. We assume that all economic actors
have infinite horizons with rational forward-looking expectations [53, 65, 66] and,
thus, fully dynamically optimize their decision variables for t = 12 periods. Those
economic agents include the industry that consists of various sectors of production,
households and governments for each of the four countries considered.
H. Schlör et al.
without economic growth to analyse if such an economic world could reduce the CO 2 -
emissions as demanded by the IPCC [36] and the World Meteorological Organization
(WMO) [87] to limit global warming to 1.5 °C [36].
Addressing this controversial debate, the objective of our model is to contribute to
the discussion about the characteristics of a post-growth economy in which the FEW
nexus is embedded. Research has to address a number of growth-related questions:
1. Which effect will different growth scenarios have on emissions arising from
production and consumption?
2. Can an economic system be organized as a zero or de-growth economy within
a globalized economic growth system? And, if so, what are the national and
international economic consequences?
3. What effects will such a transformation have on occupation, utility, capital needs,
and the FEW nexus?
Based on these challenges, we derived a new, stylized model consisting of four
countries to discuss the effects of different growth scenarios on the various key
economic indicators.
4 A Four Country Dynamic Multinational CGE Model
Solow argues that his growth model is based on theoretical assumptions because “all
theory depends on assumptions which are not quite true. That is what makes it theory.
The art of successful theorizing is to make the inevitable simplifying assumptions
[72]” based on a realistic view on the economic development.
Hence, we start our analysis with the definition of our assumptions to approach
reality.
4.1 Introduction
We use a dynamic multinational general equilibrium model (GE model) based on
ECOMOD 2003. Similar models were used, for example, also by Bretschger [13].
The modelling approach was inspired by Kaldor [39] and is in line with the tradition
of the Arrow–Debreu model [7, 8], the latter of which was used to prove the existence
of equilibria [33].
There is no uncertainty or no money illusion. We assume that all economic actors
have infinite horizons with rational forward-looking expectations [53, 65, 66] and,
thus, fully dynamically optimize their decision variables for t = 12 periods. Those
economic agents include the industry that consists of various sectors of production,
households and governments for each of the four countries considered.