OTB: CGE Leverage Points and Development First ModelingTara CaetanoDate: 7 November 2014

Identifying the way that assumptions we make in the model affect the results

First step to quantifying the uncertainties in long term CGE modeling

Main leverage points:Three arms that determine GDP: TFP; investment share of savings; population growth (labour supply)

Elasticities (substitution, trade, income, production)

World prices

Foreign savings

Others (government consumption adjustment factor, wage distortion factor, direct tax scaling factor)

Leverage Points – Quantifying Uncertainty

Calibrating a baseline that is more inline with our development goals

Similar to the Brazilian reference case

Crude method of ensuring development firstAll households above the poverty line by 2050

An increase in employment over the period (?)

Reduction in inequality

Introducing mitigation actions as scenarios How do these impact our development-driven economy?

Can we achieve carbon reductions whilst maintaining development?

Development-First Baseline

South Africa has an official unemployment rate of 24.7%

Youth unemployment between 40% and 50%

Focus on growth: belief that it will generate employmentTrends have shown that growth has led to carbon intensive, capital intensive growth in South Africa – not driving employment

How do we generate demand for labour in SA?- No silver bullet- Market rigidities are a barrier for employment- Education, training and skills development

Explore the methods for capturing employment in the CGEEquilibrating assumptions are limiting (Employment Wages/adjusting TFPs)

Role of micro-simulations?

Employment, employment, employment

A number of technical aspects that need to be addressed:Syncing emissions

Looking deeper into electricity price changes in the linked model

Assisting with the linking of other sectors in SATIM-e-SAGE

Furthering the work done on employment and inequality

Linked Model Development

Developing the current linked model to better capture the labour market, household behaviour and inequality

Micro-simulation?

Including different indicators to capture better standards of living

Including the informal sector

A comparative analysis of the impacts of mitigation actions on inequality in Brazil and South Africa

Interesting case given the development synergies and the difference in climate problems

Two country comparison can be taken forward to compare all MAPS countries

Future Work