The behavioral equations reflect bounded rationality rather
than optimizing behavior of agents. All parameters are estimated econometrically from time series data (1991–2008).
Producer prices are the result of markup calculations of firms.
Output decisions follow observable historic developments,
including observed inefficiencies rather than optimal choices.
The use of econometrically estimated equations means that
agents have only myopic expectations. They follow routines
developed in the past. This implies that in contrast to the
optimization model, markets will not necessarily be in an
optimum and nonmarket (energy) policy interventions can
have positive economic impacts.
Structural equations are modeled on the 59 sector level
(according to the European 2 digit NACE classification of
economic activities) of the input–output accounting framework
of the official system of national accounts (SNA) and the
corresponding macro variables are then endogenously calculated by explicit aggregation. In that sense the model has a
bottom-up structure. The input–output part is consistently
integrated into the SNA accounts, which fully reflect the
circular flow of generation, distribution, redistribution, and
use of income.
The core of PANTA RHEI is the economic module, which
calculates final demand (consumption, investment, exports)
and intermediate demand (domestic and imported) for goods,
capital stocks, employment, wages, unit costs, and producer as
well as consumer prices in deep disaggregation of 59 industries. The disaggregated system also calculates taxes on goods
and on production. The corresponding equations are integrated
into the balance equations of the input–output system.
Value added of the different branches is aggregated and
gives the base for the SNA that calculates distribution and
redistribution of income, use of disposable income, capital
account and financial account for financial enterprises, nonfinancial enterprises, private households, the government,
and the rest of the world. Macro variables like disposable
income of private households and disposable income of the
government as well as demographic variables represent
important determinants of sectoral final demand for goods.
Other important outcomes of the macro SNA system are net
savings and governmental debt as its stock. Both are important indicators for the evaluation of policies. The demand
side of the labor market is modeled in deep sectoral disaggregation. Wages per head are explained using Philips curve
specifications. The aggregate labor supply is driven by
demographic developments.
The model is empirically evaluated: The parameters of
the structural equations are econometrically estimated. On
the time-consuming model specification stage, various sets
of competing theoretical hypotheses are empirically tested.
Since the resulting structure is characterized by highly nonlinear and interdependent dynamics, the economic core of
the model has furthermore been tested in dynamic ex-post
simulations. Thus the model is solved by an iterative procedure year by year.
The energy module captures the dependence between
economic development, energy input, and CO2 emissions.
It contains the full energy balance with primary energy
input, transformation and final energy consumption for 20
energy consumption sectors, 27 fossil energy carriers, and
the satellite balance for renewable energy (AGEB 2011).
The energy module is fully integrated into the economic part
of the model. To examine the economic effects of increased
application of green ICT in Germany, the analysis applies
PANTA RHEI to a set of scenarios and compares the resulting economic outcomes.