Template-Type: ReDIF-Paper 1.0 Author-Name: Zubarev Andrey Author-Name-First: Andrey Author-Name-Last: Zubarev Author-Workplace-Name: RANEPA Author-Name: Nesterova Kristina Author-Name-First: Kristina Author-Name-Last: Nesterova Author-Workplace-Name: RANEPA Author-Name: Kazakova Maria Author-Name-First: Maria Author-Name-Last: Kazakova Author-Workplace-Name: Gaidar Institute for Economic Policy Author-Name: Benzell Seth Author-Name-First: Seth Author-Name-Last: Benzell Author-Workplace-Name: Gaidar Institute for Economic Policy Author-Name: Kotlikoff Laurence Author-Name-First: Laurence Author-Name-Last: Kotlikoff Author-Workplace-Name: Gaidar Institute for Economic Policy Author-Name: LaGarda Guillermo Author-Name-First: Guillermo Author-Name-Last: LaGarda Author-Workplace-Name: Gaidar Institute for Economic Policy Author-Name: Yifan Ye Victor Author-Name-First: Victor Author-Name-Last: Yifan Ye Author-Workplace-Name: Gaidar Institute for Economic Policy Title: The Future of Global Economic Power Abstract: The global economy’s enormous region-specific demographic, technological, and fiscal changes raise five major questions. First, which regions will come to dominate the world economy? Second, will regional levels of per capita GDP converge? Third, will high saving rates in fast growing regions lead to a global capital glut? Fourth, does aging augur far higher tax rates in particular regions? Fifth, will automation materially influence development? This paper develops the Global Gaidar Model, a 17-region, 2-skills, 100-period, OLG model, to address these questions. The model is carefully calibrated to 2017 UN demographic and IMF fiscal data. Productivity growth and its interaction with demographic change are the main drivers of future economic power. Fiscal conditions and automation matter are secondary factors. Our baseline simulation, which sets future productivity based on each region’s long-term record, predicts China and India becoming the world’s top two economies with 27.0 percent and 16.2 percent of 2100 world GDP, respectively. The respective US and Western Europe shares are just 12.3 percent and 11.9 percent. Our baseline also features an evolving global savings glut, major reductions in the world interest rate, substantial aging-related increases in tax rates, and permanent differences in regional living standards. Automation makes little difference to these results. But assumed productivity growth does. If recent productivity continues and demographic projections prove accurate, India will account for one third of world output in 2100 and China for over one fifth. The US output share will grow slightly while other developed countries shrink dramatically. Under more sophisticated, if seemingly less plausible projections, productivity growth in China and India dramatically slows leaving China’s plus India’s 2100 output share at only 16 percent, but, remarkably, Africa’s at an astounding 17 percent. Classification-JEL: E0,J0,O1 Keywords: Global economy, Global Gaidar Model, OLG model, GDP Creation-Date: 2022 Revision-Date: 2022 Length: 50 pages File-URL: https://www.iep.ru/files/RePEc/gai/wpaper/wpaper-2023-1254.pdf File-Format: application/pdf File-Function: Revised Version, 2023 Handle: RePEc:gai:wpaper:wpaper-2023-1254