Modelling consumption and constructing long-term baselines

Modelling and projecting consumption, investment and government demand by detailed commodities in CGE models poses many data and methodological challenges. In this paper we review the state of knowledge of consumption models for commodities (price and income elasticities and demographics), and review the historical trends that we should be able to explain. We then discuss the current approaches taken in various global and national models to project the trends in demand at various levels of commodity disaggregation and identification of household/income groups. We discuss the pros and cons of the various approaches to adjust parameters over time or using functions of time, and discuss possible research to improve modelling and projection. We briefly discuss the allocation of total investment and government demand to individual commodities.