Weifeng Larry Liu, Warwick McKibbin, Geoffrey Shuetrim, and Peter Wilcoxen
The global economy has experienced significant structural change over the past several decades and is expected to continue evolving in the future, driven by both supply- and demand-side forces. This paper focuses on the supply side, illustrating how productivity growth drives long-term structural change. We examine three scenarios: demographic change in the baseline, technological catch-up of developing countries toward the global productivity frontier, and global productivity growth in manufacturing driven by automation technology. We simulate the scenarios in a multi-region, multi-sector general equilibrium model (G-Cubed). The model captures not only the direct channel of different productivity growth across sectors, but also the indirect channels through sectoral and international linkages. The analysis highlights how asymmetric productivity growth across sectors and countries can reshape global economic structure over time, with important implications for economic growth, international trade, and the distribution of global economic powers.
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