The INGENUE model has been developed in order to analyse in a unified framework the stakes of the asynchronous ageing process in the different world regions and of the long-run catching-up process of the developing countries. It focuses on the long term growth perspectives, on the saving and investment dynamic of the different regions as well as on the evolution of the world interest rate. The third version of the model (that notably integrates oil trade, public expenditures and public debt as well as the imperfect allocation of capital between regions by financial markets) is at the end of its developpemnt stage. INGENUE is an overlapping-generations general equilibrium model describing a world divided into ten regions on the basis of demographic and socio-economic criteria: North America (including Australia and New Zealand), Western Europe, Japan, Eastern Europe, Russian world, China World, Indian world, Latin America and Africa. Each region is made up of three agents: households, firms and the public sector.

Households are characterised by their age (21 generations) that determines their wealth, their labour endowment and their life expectancy. Each period of five years, households choose their consumption/saving profile for the rest of their life with the objective of maximising their inter-temporal utility function. Adult households have perfect expectations. The expected utility of each household depends on the consumption profile weighted by the uncertain survival probability. Four main variables determine the national saving: (i) the population structure, (ii) the productivity and population growth rate (iii) the weight of the PAYG pension system and (iv) the public sector surplus.

The labour market equilibrium is guaranteed in each region by the flexibility of the real wage rates which equalise the (exogenous) labour supply, determined by the demographic evolution and the legal retirement age, and the (endogenous) labour demand, depending on the productivity of local labour. The stylised production bloc allows to include the variation in the exchange rates. The national production of intermediate goods depends on the combination of local labour, productive capital and energy (oil). The intermediate good produced by each region is partly exported to constitute a world intermediate good. Finally, the final domestic good combines the domestic and world intermediate good. Technical progress is exogenous and raises the total factor productivity in North America. The productivity growth rates in the other countries depend on the assumptions concerning their progressive catch-up with the US.

International capital markets are imperfect given the hypothesis that capital movements don’t allow to equalise marginal capital return in the different regions. Portfolio choices depends on expected return differential between the different saving instruments (productive capital and public bonds os the different regions). Consequently, the real domestic interest rate is different to the world real interest rate.

 Lastly, the public sector behaviour in each region consists in managing the level of public expenditures, labor and consumption taxes, the level of pensions of the PAYG superannuation pension fund and the level of public debt Each regional public sector is characterised by a few institutional parameters: the legal retirement age and the targeted replacement ratio, the targeted labor tax rate and the targeted public debt.

A complete description of the model and the forcast for the world economy for 2050 will be available for mid-2011.

The Ingenue model is developped jointly with OFCE and Cepremap