The G-Cubed Model

Interestingly enough Warren Mckibbin and Peter Wilcoxen's G-cubed model (original explanatory paper here) which is considered by some to be so useful for modelling demographic impacts , seems to have been originally developed, in part at least, to handle global warming issues:


The G-Cubed model has been constructed to contribute to the current policy debate on environmental policy and international trade with a focus on global warming policies, but it has many features that will make it useful for answering a range of issues in environmental regulation,microeconomic and macroeconomic policy questions.

The model combines the dynamic macroeconomic modelling approach taken in the MSG2 model of McKibbin and Sachs (1991) with the disaggregated, econometrically-estimated, intertemporal general equilibrium model of the U.S. economy by Jorgenson and Wilcoxen (1989). As the authors explain:

The Jorgenson-Wilcoxen model breaks the economy down into 35 separate industries, each of which is represented by an econometrically estimated cost function. The G-Cubed model has only 12 sectors but each sector is based on econometrically estimated cost functions.

We are informed that G-Cubed is still in the process of development but it is already a large model. In its current form it contains over 5,000 equations and 110 intertemporal costate variables. Nonetheless, it can be solved using software developed for a personal computer. Wow!