OECD Economics Department Working Papers

Working papers from the Economics Department of the OECD that cover the full range of the Department’s work including the economic situation, policy analysis and projections; fiscal policy, public expenditure and taxation; and structural issues including ageing, growth and productivity, migration, environment, human capital, housing, trade and investment, labour markets, regulatory reform, competition, health, and other issues.

The views expressed in these papers are those of the author(s) and do not necessarily reflect those of the OECD or of the governments of its member countries.

English, French

Capital, Energy and Labour Substitution

The Supply Block in OECD Medium-Term Models

This paper sets out the various stages in the construction and estimation of a supply block for medium-term projection models. It describes the theoretical basis for the specification chosen and the estimation results.

The basic block is a set of production factor demand functions. It is refined by modelling the scrapping behaviour of firms, introducing the effects stemming from movements in hours worked, and examining the role of profits. Other possible changes or improvements are outlined. The model is used to simulate the effects of movements in the relative prices of labour, capital and energy in recent years ...


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