Simulating evolution of interindustry linkages in endogenous dynamic IO model with layers of techniques

Abstract

AbstractIn this article, we propose a new version of dynamic input–output model in which both technological progress and deployment are endogenous, and where sector‐specific outlays on R&D speed up the development of new technologies and the installation of capital stock. In this two‐technology model, the new and old technical processes within a sector exchange their relative weights in production. We use the model to obtain projections of the interindustry linkages of sectors in the Polish economy over the next 50 years. The results of this simulation suggest an ongoing change of the composition of the set of key sectors of the Polish economy. In general, one may expect to see an ongoing drop in the importance of agriculture‐ and heavy‐industry‐related sectors on the one hand, and a rise in the importance of services‐related ones on the other.