The Economic Consequences of Productivity Changes: A Computable General Equilibrium (CGE) Analysis

Cutler H. and Davies S. The economic consequences of productivity changes: a computable general equilibrium (CGE) analysis, Regional Studies. This paper uses a data-intensive CGE model to examine sector-specific impacts of increases in total factor productivity and labour and capital productivity. It focuses on the importance of a sector's output in household consumption and firms' intermediate input demand, the importance of labour and capital in value added and the impact on the city's consumer price index (CPI) as factors influencing the transmission mechanism. The general equilibrium effects result in unambiguous increases in household migration for total factor productivity and capital productivity but not for the labour case. This analysis emphasizes the impact on household income and tax revenue per new household.