MPIDR Working Paper

The challenge of sustainability in a global system: documentation of a transdisciplinary, multi-country, dynamic simulation model

Abstract

Sustainability models should consider aspects of the economy-environment-population nexus, be dynamic, and acknowledge the disparity among actors/countries. Lastly, sustainability models should not be programmed either to reject sustainability (e.g., an essential, nonrenewable input) or to affirm it (e.g., costless, endogenous technical change). We develop a simulation model to assess sustainable development on three levels: economic (by determining production, consumption, investment, direct foreign investment, technology transfer, and international trade), social (by calculating population change, migration flows, and welfare), and environmental (by calculating the difference between environmental pollution and upgrading expenditures). The model follows “representative” countries that differ in their initial endowments (i.e., natural resource endowment, physical and human capital, technology, and population), and thus in their development levels and prospects. In addition, we model free substitution in production, flexible economic structures, the ability to upgrade input factors via investment, and optimizing agents who possess a high degree of mobility and information, and who interact through and in response to market equlibiria.