January 12, 2006

Athena; a multi-sector model of the Dutch economy

This document describes Athena, CPB's multi-sector model of the Dutch economy and illustrates the mechanisms of the model by presenting a number of applications. The model is used for policy analyses that require a sectoral dimension and for the construction of long-run scenarios.

Athena is a dynamic, annual model with a strong focus on the long-run.

Roughly, the model can be described as follows. The production structure has been the focus of the recent research efforts resulting in the current version of the model. The theoretical foundation of the model assumes optimising behaviour of firms in 18 industries. On the labour market, the negotiation process for wages follows a right-to-manage approach. On the demand side, most consumers behave as in life-cycle theory, but some consumers are liquidity constrained. In the last block, the public sector (government, social security and pensions), some aspects are endogenised as the model is primarily aimed at long run structural analyses.

The applications of the model include CPB's latest long term scenarios for the Dutch economy, the analysis of a set of policy measures concerning lower corporate tax rates and the effects of five standard simulations.