A first model has been balanced for the Spanish economy. This is an economic model with an energy and environmental module that will be the base for conducting different tests on tax reforms. It has been balanced for one single year. This is an important milestone of the project, as balancing a model like this is a time-consuming and tough job. Once done this, we can move on to further steps.
However, the aim of the project in this current outgoing phase in Harvard is to develop a dynamic, recursive general equilibrium model, where economic growth is driven by growth of labor, capital accumulation, and the growth in total factor productivity, so we are already working now on the dynamics of the model, by setting different assumptions on exogenous variables, mostly on population, labor force, evolution of imports, exports and consumption patterns.
In this first version of the model, technology is represented by Cobb-Douglas production functions in all industries.
This model gives an emphasis to energy consumption (coal, oil and natural gas) and CO2 emissions. This is relevant as we will be able to assess how changes in taxation (or other variables) variate the use of energy and carbon emissions, beyond the short-term and long-term impacts on different economic variables.