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Abstract

This paper provides an examination of the implications associate with different types of technological change for the operation of recursive dynamic CGE models. The analyses contrast the implications of different types of technical changes – Hicks, Harrod and Solow neutral – for model performance and analyses the importance of tracking capital vintages to ensure that capital services as opposed to capital stocks are used in the model’s production functions. In addition it is noted that the interpretation of technical change in most CGE models does not coincide with the interpretation in the productivity literature; the adjustments necessary to calibrate recursive dynamic models are identified.

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