Geoscience Reference
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Fig. 16.10
Real GDP decomposition by year (% deviation from baseline)
wage in 2014, it also makes a negative contribution to the 2015 working age
population (Fig.
16.7
). For a given employment rate, this generates a negative
contribution to 2015 employment (Fig.
16.6
). By lowering the marginal product
of capital relative to baseline in 2015, this attenuates what would otherwise be a
positive investment response to the fact that the deviation from baseline in the risk
premium in 2015 is significantly smaller than in 2014 (Fig.
16.2
).
Examining Fig.
16.2
, we see that the values of our key behavorial variables have
returned close to baseline by the simulation's final year. However in Fig.
16.8
,we
see a persistent (but tapering) GDP deviation. The enduring GDP deviation at the
end of the simulation period reflects the legacy of shocks in earlier periods,
particularly those relating to behavioral variables. To make this clearer,
Fig.
16.10
presents a new decomposition of the GDP deviation, distinguishing the
contributions of the shocks within any given year to the GDP deviations of current
and future years.
22
For the event year, Fig.
16.10
distinguishes the effects of behavioral and
resource shocks, while latter years identify only behavioral consequences (there
22
Figure
16.10
is constructed from 14 simulations: (1) a 2013 resource loss simulation, in which
all resource loss shocks are applied in 2013, and the simulation is run out to 2024; (2) 12
behavioral simulations, in which the values for shocked behavioral variables in year
t
are moved
to their year
t
deviation values, returned to their baseline values in year
t
+ 1, and the remainder of
the simulation run to 2024; and (3) the full simulation. The sum of the results of simulations (1)-
(2) are very close to, but not exactly equal to, the results of simulation (3). This is due to
interactions between the shocks, captured by simulation (3), but missed when the shocks are
modeled as a sequence of unconnected simulations. We report the difference as “residual”.
