ADAGIO

ADAGIO (A DynAmic Global Input-Output Model) is an econometric input-output model of the EU 27 and 15 other countries (Australia, Brazil, China, the UK, India, Indonesia, Japan, Canada, Korea, Norway, Russia, Switzerland, Taiwan, Turkey and the USA). At the core of the model are supply and use tables by 64 sectors or goods (NACE Rev. 2 two-digit; the sectors are linked by a trade matrix that connects the model regions at goods level). Base year of the model is 2019.

Key behavioural equations are estimated econometrically: factor demand in production is determined via a translog model together with the output prices. This leads to a consistent pricing mechanism: output prices determine basic commodity and service prices (price at the factory gate). Together with trade and transportation margins as well as taxes on goods and services, purchaser prices are derived (the prices paid by the various consumers). Exports valued at fob prices (free on board) at the border of the exporting country become cif-valued (cost, insurance, freight) imports at the border of the importing country after international trade and transportation margins have been added. The export flows of the 64 goods are to a large extent endogenous (from the mirrored imports of the other model regions); exports to the "rest of the world" not covered by the model are exogenous (but react to price developments).

In private consumption, a distinction is made between two durable (vehicles, housing) and 13 non-durable consumer goods (which are determined in a quadratic AIDS model).

Dynamic wealth accumulation is implemented in both private and public consumption, with an additional distinction being made between five income groups (quintiles) in private consumption. There are various links between private and public household spending – taxes on income and wealth or social security contributions flow from households to the state; transfer payments (pensions, unemployment benefits, other transfers) flow from the state to households. Similarly, albeit to a lesser extent, there are connections between the corporate sector and the state (via production taxes, subsidies, corporation tax, etc.).