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【video】2No.E2018009:Green Transformation: A System Dynamics Model on Endowment, Investment and Employment
Green Transformation:

A System Dynamics Model on Endowment, Investment and Employment



Yan Wang, Hefeng Tong and Jiajun Xu


Institute of New Structural Economics
Peking University, June 4 2018


(Respectively, Senior visiting fellow at the Institute of New Structural Economics(INSE), Researcher at Institute of Scientific and Technical Information(ISTIC), and Assistant Professor and Executive Deputy Dean, at INSE,Peking University. The authors thank Justin Yifu Lin, John D. Shilling, Weishuang Qu, Vinod Thomas, HuaWang, Yong Wang and Xin Wang for advice; Ji Qi for pollution data sources, and participants at Institute of New Structural Economics Peking University for comments and suggestions. Comments and suggestions may be sent to YanWang at wangyan@nsd.pku.edu.cn.




Structural transformation is critical to attaining improvements in productivity and employment generation.However, it is imperative that any structural transformation undertaken should take a green approach as the international community have placed great emphasis on achieving Sustainable Goals(SDGs) by 2030. Given the importance of green structural transformation, this paper attempts to explore a system dynamics(SD) model to analyze and simulate three policy options to achieve transformation to a green economy in an effort to shed new lights onto the claimed tradeoff between competitiveness and greenness. Consistent with the New Structural Economics (Lin 2010,2011), our main analytic approach starts from the structure of endowment(stocks), followed by investment (flows) in green sectors and lastly the structure of employment and changes in labor productivity. The key findings from our simulation results are as follows: first, although there is a short run negative impact on GDP growth, the long run benefits outweigh the short run cost; secondly, green sectors will expand rapidly generating significant number of jobs; and lastly, as pollutant emissions fall along with a decline in pollutant intensity, labor force becomes healthier and more resilient thus contributing to a rise in productivity in the economy.