Climate Change Impact and Structural Reforms in Kiribati slide image

Climate Change Impact and Structural Reforms in Kiribati

KIRIBATI Appendix I. Model Input Parameters for Long-Term Growth Calculations, (2021-2050) Table 1. Kiribati: Model Input Parameters for Long-Term Growth Calculations, (2021-2050) Model Description The model uses a Cobb-Douglas production function Y=AKH (HL)1-a, where Y denotes real GDP, A technology, K capital stock, L work force, H human capital and a capital-output elasticity (or capital income share), and an equation for capital accumulation Kt+1=Kt (1− 8)+It, where It denotes investment and 8 is the rate of capital stock depreciation. This yields an equation of long-term growth, which can be expanded to include demographic factors, so that 9y9A (1a) (gh + gw + 9N + gp) + (α / K/Y) I/Y - α S This equation implies that GDP growth (gy) is the (weighted) sum of total factor productivity (gA), human capital (gh), demographic factors (output per worker or labor productivity (gw) and growth in working age to population ratio (gw)), labor market participation (gp), the marginal productivity of capital (a / K/Y) and the investment rate (I/Y), while controlling for the rate of capital depreciation (8). The table below summarizes values for the model's parameters under different scenarios. When Kiribati data are not available, input values are selected as the lower tenth percentile of the World Bank's low and middle-income country (LMIC) group (comprising 52 countries) in the baseline scenario. Where appropriate, the comprehensive development scenario foresees a growth of Kiribati's input factors to achieve the twenty-fifth LMIC percentile within a given horizon. Model Type Inputs General Model Capital-output ratio Depreciation rate Labor share Baseline (No change) 2.4 4.2% 39.7% Comprehensive Development 2.4 4.2% 39.7% Human capital growth Labor market participation Male Female External Debt/GDP Net FDI/GDP Population growth 0.75%, 1% by 2035 45% 50% 40% 21% 0.33% 1.50% by 2035 60% 65% by 2050 Working age to population Poverty rate (headcount) Threshold Gini coefficient Investment/GDP ratio: Initial GDP per capita (2019) Total Factor Productivity Public vs Private Investments Public investment share Public investment ratio Public capital-output ratio Public depreciation rate Private investment ratio Private depreciation rate Private capital-output ratio Elasticity output to public capital Efficiency of new public capital 1.30% 1.18% (2050) 60.3% 63.5% (2050) 30% National poverty line 0.39 15% US$ 1,615 -0.25% -0% by 2050 75% 11.25% 1.8 4% 3.75% 4.8% 0.6 0.10 (low) 60% 55% by 2050 25% by 2035 2.8% by 2040 same same 30% same 0.37 by 2035 20% by 2035 -0.25% -0.21% by 2050 75% 15% by 2050 1.8 4% 5% by 2035 4.8% 0.6 0.17 (default) 70% by 2050 Note: For total factor productivity, an alternative specification (using inputs on innovation, education, efficiency, infrastructure, and institutions) is experimented. TFP growth would be slightly higher under the baseline, based on paths from peers in the region and elsewhere, but similar under the development scenario. INTERNATIONAL MONETARY FUND 29
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