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Double DividendEnvironmental Taxes and Fiscal Reform in the United States$
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Dale W. Jorgenson, Richard J. Goettle, Mun S. Ho, and Peter J. Wilcoxen

Print publication date: 2014

Print ISBN-13: 9780262027090

Published to MIT Press Scholarship Online: September 2014

DOI: 10.7551/mitpress/9780262027090.001.0001

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Structure of the Intertemporal General Equilibrium Model

Structure of the Intertemporal General Equilibrium Model

Chapter:
(p.33) 2 Structure of the Intertemporal General Equilibrium Model
Source:
Double Dividend
Author(s):

Dale W. Jorgenson

Richard J. Goettle

Mun S. Ho

Peter J. Wilcoxen

Publisher:
The MIT Press
DOI:10.7551/mitpress/9780262027090.003.0002

This chapter describes the IGEM in detail – the demand and supply sides of the economy, the inter-industry (input-output) structure and the determination of intertemporal equilibrium. The production function allows for substitution among inputs, autonomous technical change, and induced technical change. The household model allows an aggregate demand function to be expressed as a sum of individual household demand functions; this aggregate function is non-homothetic and depends on the demographic projections of the population. Household optimization also generates goods demand and labor supply. Intertemporal optimization generates savings and hence investment for capital accumulation and the cost-of-capital equation. The model is made consistent with the National Accounts and the Input-Output accounts. We describe the solution algorithm.

Keywords:   Intertemporal equilibrium, input-output, National Accounts, production function, substitution, induced technical change, household model, aggregation demand, savings, investment, cost of capital, labor supply, population projections, solution algorithm

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