2 SOCIOECONOMIC MODELS
2.3.4 Major Components of the Model
Private Consumption
The final demand category includes expenditures made by domestic private house- holds, disaggregated by supply sector. The purchase of real estate and the purchase or construction of buildings is not included. Since the input o u t p u t table is based on domes- tic activity, the private consumption category also excludes expenditures on consumer goods by Austrians in foreign countries. In contrast to the system of national accounts, valuation is at producer prices, not at consumer prices. Trade margins contained in pri- vate consumption are recorded as private consumption of services supplied by the trade sector. The sales of the other supply sectors contain no trade margins.
Because private consumption is a driving force in the economy, this category is considered in some detail in the AUSTRIA 11 Model. A number of consumption functions are estimated to analyze the dependence of the demand for certain goods and services on personal disposable income. All functions are estimated at constant 1970 consumer prices.
W. K . Foell e t al.
EXOGENOUS VARIABLES
PARAMETER
INPUT-CUTWT MODEL
I I
Nonmmplkiw i m m r
FIGURE 4 The structure of the AUSTRIA 11 Model.
Wisconsin IIASA Set of EnergylEn vironment Models 23 TABLE 4 Definition of the intermediate sectors of the AUSTRIA I1 Model.
AUSTRIA 11 sectors
a~ncludes rented and privately owned buildings.
The selection of a specific function is based on both statistical and plausibility criteria.
Although personal disposable income is the main determinant of consumer behavior, addi- tional variables are introduced in the esti~nation procedure to account for special impacts, such as extraordinary levies on cars or luxury items. Price variables are not included in AUSTRIA 11, although certain functions are estimated that take into account reactions to price changes.
The consuinption functions are estimated at consumer values. The projections are then transformed into producer values using constant trade margins for the sales of each supply sector. Projections of the major components of private consu~nption that were used in the Austrian Case Study are displayed in Figure 5, Figure 6, and Figure 7. (Figure 5 inay give the impression that the share of food in total private consulnption increases, but
W.K. Foell e t al.
Personal disposable income ( l o 9 AS19701
FIGURE 5 Projections of major components of private consumption in Austria in relation to per- sonal disposable income - I. Sector (1) is agriculture and forestry; Scctor (3) is petroleum and natural gas; Sector ( 6 ) is food; Sector ( 7 ) is tobacco, Scctor (8) is textiles; Sector (9) is clothes; Sector (10) is leather; and Sector ( I 1) is chemicals. Cf. Table 4.
Wisconsin -IIASA Set o f Energy/Environrnent Models
Personal disposable income (lo9 AS1970)
FIGURE 6 Projections of major components of private consumption in Austria in relation to per- sonal disposable income - 11. Sector (16) is iron and metal products; Sector (17) is electrical machinery and equipment; Sector (1 8) is construction and repair of vehicles; Sector (20) is wood products; and Sector (22) is paper products, printing, and publishing. Cf. Table 4.
W . K . Foell et al.
Personal disposable income
FIGURE 7 Projections of major components of private consumption in Austria in relation to per- sonal disposable income - IU. Sector (23) is construction; Sector (24) is electricity, gas, and water supply; Sector (26) is transportation and wmmunications; Sector (27) is banking and insurance; Sec- tor (28) is hotel.. and restaurants; Sector (29) is other services; Sector (30) is housing; and Sector (31) is public administration. Cf. Table 4.
Wisconsin IlASA Set ofEnergy/Environment Models 2 7
actually its share decreases over the given range of personal disposable income - namely, 200 X 10' AS,
,,,
t o 1,000 X 10, AS,,,,
- from 23% to 20%).*Public Consumption
The final demand category includes the total sum of expenditures by public author- ities for consumption purposes. (Public investment is recorded as part of investment in machinery and buildings, demand categories that will be described later.) However, expen- ditures of nationalized companies (such as railways and the communications sector) are not included in the public consumption category. They are treated as intermediate trans- actions or investments. The largest component in the public consu~nption category is transfer payments from the public service sector, which are equal to the total value added in the public service sector*" after deduction of direct compensation of expenses.
Total public consumption is projected by an econometric function dependent on the development of the Austrian GDP. Projections are not made on a more disaggregated basis. The structure of public consumption is generally kept constant, but can be changed exogenously for any year of the projection period. One example of such a change is the inclusion of the effects of policy measures such as free school books for all children.
Gross Investment
According to the system of national accounts, investment is defined as the initial purchase or internal production of investment goods. Repair services that increase the value of investment goods are considered investments, but the purchase of used invest- ment goods is not.
Gross investment is divided into investments in construction and investments in equipment, machinery, and transport utilities. These investments are recorded by supply sector.
As with the approach used in projecting public consumption, only the sums of gross investments is projected. An econometric function is used t o make the projections, with GDP as the independent variable. The structures of both investments in construction and investments in machinery are assumed to be constant, although one can use other assump- tions for the projections for any year of the time period considered. In Austria many intermediate sectors are dominated by one or only a few enterprises; for this reason infor- mation on investment plans in the public sector and plans of large enterprises can be used to test the results derived from the equations describing the total investment.
Inventory Changes
The "inventory change" category shows the change in the stocks of raw materials, intermediate goods, semifinished and finished products, and articles of commerce, dis- aggregated by supply sector. No distinction is made in regard to the sector that keeps the stocks.
The AUSTRIA 11 Model calculates the level of inventory changes by means of an econometric function, with GDP as the independent variable. The inventory changes
*In 1970 personal disposable income in Austria equalled 236 X lo9 AS,
0 .
**This includes such items as wages and salaries and depreciation.
28 W. K. FoeN et al.
projected in this way are not intended to represent the changes resulting from business cycle fluctuations, but rather should be interpreted as representing the expansion of stocks to be expected as economic activity grows. The structure of inventory changes is generally assumed to be constant.
Expenditures of Foreign Tourists in Austria
The "foreign tourist expenditure" category includes all expenditures made by for- eigners in Austria. The sum of these expenditures is projected by means of an econometric function; the GDP of the Federal Republic of Germany is used as an indicator for the pro- jections. The main components are the services of hotels, restaurants, and the transporta- tion sector, and the purchase of goods. The structure of these expenditures is generally assumed to be constant. However, the insertion of individual projections is possible with- out major effort.
Exports and Imports
Two categories of exports are considered in the AUSTRIA I1 Model - the export of services and the export of commodities. The export of commodities is broken down by country or groups of countries of destination. Variables describing economic activity in the country of destination and variables indicating competitiveness (including relative prices and exchange rate fluctuations) enter into the approximately 1 SO export equations as explanatory variables.
On the import side, services are again treated separately from commodities with no distinction made about the country of origin. Imports of commodities are divided into competitive and noncompetitive imports.
Noncompetitive imports are defined as imports of commodities that are not pro- duced within Austria. There are a great number of such commodities, but only the most important ones are specifically identified in the AUSTRIA I1 Model, such as cotton, nat- ural rubber, bauxite, and hard coal. Noncompetitive imports are calculated in the AUSTRIA I1 Model by means of technical coefficients describing the level of output of the receiving sectors. Just like the input-output coefficients, these coefficients represent strong tech- nological dependencies. This method is also used for imports that are not noncompetitive in the strict sense of the word, but for which the domestic production is limited and can- not be increased to meet rising demand. Iron ore production and crude oil extraction are examples of such cases.
Competitive imports of commodities and imports of services are projected by means o f econometric equations that link these imports to general indicators. These classes of imports are recorded as negative components of final demand.
Technical Coefficients
The description of the technological structure in the AUSTRIA 11 Model is based on a 1970 table of intermediate transactions. Since technological structure can change considerably over a long period, the model allows for changes in the technical coefficients.
Changes in the input-output coefficients and in the coefficients for noncompetitive imports are introduced exogenously into the model. Estimates derived from time-series analyses are used for some of the coefficients, but most information comes from enter- prises. The use of data reflecting the expectations of business is of special importance
Wisconsin -IIASA Set o f EnergylEn vironment Models 29
in sectors that are dominated by one or only a few enterprises, for the installation of a new technology can lead t o abrupt changes in coefficients.