MacroVision: methods notes (simulation model and empirical pipeline, as implemented)

Source: this repository. Script paths are relative to scripts/ unless stated. file:line cites the line that defines each item. The household model is copied into several files (saving_asset_sensitivity_v73, integrated_housing_v76, credit_resolution_v77, corporate_credit_model_v98, corporate_workout_model_v100). The final results use **corporate_credit_model_v98.py (cited as CCM98) and corporate_workout_model_v100.py (CWM100)**. CWM100 matches CCM98 line for line except for the workout additions (§4.4). Its line numbers are +1 from line 10 and +3 from line 45 onward, up to line 137.

All quantities are in normalized units: base-year nominal output = 100, workforce = 1, base price level = 1. They are not currency amounts or a calibrated country (coupled_thesis_v71.py:118). Every output is flagged illustrative: True, calibrated: False.

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A. Simulation model

1. Time structure and exogenous paths

• The horizon is years = 20 and the transition lasts transition_years = 10 (coupled_thesis_v71.py:17). Years run from t = 0 to 20, giving 21 annual observations (v71:37).
• Automation progress is a_t = min(1, t / 10) (v71:38).
• Unemployment is imposed: u_t = 0.20 · a_t (v71:39; terminal_unemployment = .20, v71:17). With η = 0 the capital feedback leaves it unchanged, which test_macro_sensitivity_v96.py:20 checks (u_t = 20·min(t/10,1) %).
• Efficiency (productivity) is e_t = 1 + g · a_t, with g = productivity_gain (default .50, grid {.25,.5,1}) (v71:40).
• The wage index is w_t = 1 + wage_gain·a_t, with wage_gain = 0 throughout, so w_t = 1 (v71:41, :17).
• Year 0 is a reference year. At t = 0 there is no fiscal settlement, no asset trade, no investment and no balance update (CCM98:75, :107–109, :143–144). Year-0 cash flows are computed but are not booked to stocks (new_cash=dict(cash), CCM98:109).

2. Macro core (coupled_thesis_v71.simulate)

Constants (v71:8–16):

Other defaults (v71:17) are pass_through = .75, profit_tax_rate = .25, capture_share = 1., debt_service = 0., and the bounds are at v71:18. The grid (§6) overrides pass-through, tax rate, capture share and productivity gain.

Equations, year t (v71:42–52):

• Real output: Y^r_t = e_t (1 − u_t) (v71:42)
• Price index: P_t = 1 − π · (BASE_WAGES/BASE_OUTPUT) · (1 − w_t / e_t) = 1 − π·0.6·(1 − 1/e_t), where π = pass_through (v71:43). This is the share of unit-labour-cost savings passed into prices. For example, at g = 1, π = 1 the terminal value is P = 0.7.
• Nominal output: Y_t = 100 · P_t · Y^r_t (v71:44)
• Wage bill: W_t = 60 · w_t · (1 − u_t) (v71:45). The nominal wage per employed worker is constant.
• Profits: Π_t = Y_t − W_t (v71:46)
• Profit-tax rate (linear ramp): τ^π_t = .25 + a_t (τ̄^π − .25) (v71:47)
• Capture share (linear ramp): κ_t = 1 + a_t (κ̄ − 1) (v71:48)
• Wage tax: T^w_t = .20 · W_t (v71:49)
• Profit tax: T^π_t = τ^π_t · κ_t · max(0, Π_t) (v71:50)
• Revenue: R_t = T^w_t + T^π_t (v71:51)
• Distributable profit: potential_profit_after_cash_tax = Π_t − T^π_t (v71:69). All of it is paid out as dividends (§3.3).
• Existing government purchases: G_t = 20.2 · P_t (v71:52; repeated in CCM98:67)
• Government interest: 0.03 × outstanding bonds (CCM98:67)

Important: v71 also contains its own benefit and debt recursion (v71:54–62: debt = beginning_debt − overall). The final path calls simulate(p,'budget') (CCM98:47) only for the production and revenue rows. Government debt is rebuilt inside the household model under a no-new-borrowing rule (§3.4), so v71's debt recursion is not used in the final results.

3. Households (fixed cohorts)

3.1 Cohorts, ownership and initial stocks

• Cohort masses (MASS, household_distribution_v72.py:7): workers .70, displaced_free .10 (no initial consumer debt), displaced_debt .10, owners .10.
• Equity ownership schemes (SCHEMES, v72:12):

- concentrated: owners hold 1.0 unit and everyone else 0. - broad: units equal cohort masses.

• REAL_EQUITY = 200. (v72:9). The constant-real quote is q_t = 200·P_t per unit (CCM98:26), and total units start at 1.
• Consumer loan: INITIAL_PRIVATE_LOAN = 20. in aggregate, which is 200 per debtor (v72:10). It is held by owners, owed by displaced_debt, and is interest-only at PRIVATE_RATE = .04 (v72:11).
• Interest due is .04 × the nominal balance (CCM98:66). The loan is not indexed, so the real burden rises when P falls.
• Government bonds of 60 are held by owners (CCM98:49, :54).
• Household cash starts at INITIAL_CASH = 20. × mass for each cohort, 20 in aggregate (CCM98:12, :48). Other initial stocks: INITIAL_FIRM_CASH = 30. and INITIAL_REAL_CAPITAL = 200. (CCM98:13–14).
• Reference disposable income (v72:16–26) is (1 − .2)·60 + capital income + financial income − debt due:

- Capital income = 40·(1 − .25)·share/mass (v72:20). - Owners' financial income = (.03·60 + .04·20)/.1 (v72:22). - Debt due = .04·20/.1 = 8 for displaced_debt (v72:21). - Computed values: concentrated = {workers 48, displaced_free 48, displaced_debt 40, owners 374}; broad = {78, 78, 70, 104}.

3.2 Employment and wages

• Displaced cohorts: employment = 1 − u_t/.2. Workers and owners: employment = 1 (CCM98:63). The 0.2 is hard-coded, so at u = .2 both displaced cohorts are fully unemployed.
• After-tax wage per employed worker: (1 − .2) W_t/(1 − u_t) = 48 (CCM98:64).

3.3 Income components

• Wages: mass · employment · wage (CCM98:77).
• Dividends: (Π − T^π) × units_k / Σunits (CCM98:65).
• Benefits: see §3.4.
• Government interest: paid to owners (CCM98:78).
• Consumer-loan interest:

- debt_resources = cash + gross income + q·units (CCM98:85). - paid = min(due, max(0, debt_resources)); the unpaid part is capitalized into the loan (CCM98:86, :111). - Paid interest is income to owners (CCM98:87).

• Corporate-credit interest: pro rata to claim holders (CCM98:82–83; §4.3).
• Housing income: rent and mortgage interest move from payers to owners (credit_ledger_v77.py:46).
• Net income: gross − contractual due (debtor) + housing income (CCM98:88, :98).

3.4 Benefit rule and government finance

• Required benefit for each displaced cohort k (CCM98:69–71):

B*_k = MASS_k (1 − emp_k) · max(0, P_t·ref_k − div_k/MASS_k + [due/MASS_k if k = displaced_debt]). The target is the price-indexed reference income less own dividends, plus current contractual consumer interest for debtors.

• Fiscal room: avail_t = R_t − G_t − 0.03·bonds_t (CCM98:72).
• Budget-limited fraction: f_t = 1 if ΣB* = 0, otherwise min(1, max(0, avail/ΣB*)) (CCM98:73). Paid benefits are f·B*_k (CCM98:74).
• Settlement, fiscal_settlement (CCM98:32–35; applied at :75 for t > 0):

- surplus = avail − benefits; - redemption = min(bonds, max(0, surplus)); - bonds ← bonds − redemption; - treasury ← treasury + surplus − redemption.

• The government cannot issue new debt. Treasury cash starts at 0 and earns nothing. If treasury < −1e-8, the path stops (CCM98:76).
• Redemption cash goes to owners (CCM98:89).
• Reported net debt is bonds − treasury (CCM98:159).

3.5 Consumption/saving rule (saving='income_share', the default; the only rule used in the grid)

• Spendable income (CCM98:100) = net income − maintenance − (mortgage principal paid + deficiency paid). Principal is treated as an asset exchange, not consumption.
• Year 0 deducts the scheduled principal instead of the principal paid (CCM98:102). The per-capita reference is initial_after_housing = max(0, spendable_0)/mass (CCM98:103).
• Desired consumption: C*_k = 0.9 · max(0, spendable_k) (CONSUME_SHARE = .9, CCM98:15, :104).
• Cohorts are processed in the order debtor, workers, displaced_free, owners (CCM98:113). Owners' resources include the debtor's principal repayment.
• Actual consumption: C_k = min(C*_k, max(0, cash resource + q·units_k)) (CCM98:115). Households sell equity at q to fund any shortfall below zero cash (CCM98:117–119).
• Any surplus above a cash buffer of BUFFER_YEARS = .25 × C*_k is invested in equity at q (CCM98:121–126). The debtor first repays REPAY_SHARE = .5 × the investable surplus on the consumer loan (CCM98:16–17, :124).
• The alternative rule smooth_reference (CCM98:104) is not used in v96, v98 or v100.

3.6 Housing tenure and stress (credit_ledger_v77.py)

• Tenure options (TENURES, ledger:9), initial state at ledger:11–16:

- renter: owners own all homes. - owner_free: each cohort owns homes equal to its mass, with no mortgage. - mortgage_fixed and mortgage_reset: like owner_free, but non-owners carry a mortgage of 150 × mass.

• House price: 200·(1 + (H̄ − 1)·a_t) (ledger:25).
• Mortgage rate: .04, or .04 + (r̄ − .04)·a_t for mortgage_reset (ledger:26).
• Rent: 12·(1 + (R̄ − 1)·a_t) per unit mass (ledger:27).
• Maintenance: 2 per home (ledger:34).
• Stresses (H̄, r̄, R̄) are defined at housing_stress_v75.py:8 and ledger:5. The grid uses only stable (1, .04, 1) and rate_shock (.7, .08, 1). credit_stress (.4, .12, 1) is not used.
• Mortgage payment: an annuity recast each year over the remaining term max(1, 26 − t), or 25 at t = 0 (v75:11–13; ledger:37).
• Payment waterfall per non-owner cohort, from resources that include liquidatable equity (ledger:31–42):

1. rent; 2. maintenance; 3. interest; 4. scheduled principal; 5. 20% of remaining resources toward any deficiency.

• Unpaid interest is capitalized (ledger:49) and unpaid rent becomes rent debt.
• The owners cohort is the landlord and mortgage lender. There is no bank.

3.7 Credit resolution (resolution=True, default_years=2, cost_rate=.1, recourse=0.; CCM98:38)

• Mortgage streak: a year counts if the shortfall exceeds max(1e-8, .1·due) (ledger:55).
• After 2 consecutive years, foreclosure (ledger:57–64):

- Collateral = house price × homes; cost = 10% of collateral. - Recovery = min(claim, collateral − cost). Recourse 0 means the remaining gap is written off. - The home transfers to owners and the borrower becomes a renter. Any surplus is paid to the borrower. - The cost is paid by owners as maintenance (ledger:74), so it counts as consumption, i.e. demand for production.

• Rent debt is written off after a 2-year streak (ledger:56, :67–68).
• Consumer loan: written off entirely after 2 consecutive years in which unpaid interest exceeds max(1e-8, .1·due) (CCM98:137–139).

4. Firm side

4.1 Capital feedback, feedback(.3, 0.) (capital_feedback_v74.py:17–35)

• Valid ranges are 0 ≤ α < 1 and |η| ≤ .5 (v74:18). Let k_t = K_t/200, with beginning-of-year capital (v74:22).
• Labour: L = min(1, max(.8, (1 − u)·k^η)) (v74:25). With η = 0, L = 1 − u: the capital–labour channel is switched off, so unemployment stays on the imposed path.
• Output: Y_t ← Y_t · k^α · (L/(1 − u))^(1−α), with α = .3 (v74:26). Capital scales nominal output, while the price index from v71 is unchanged.
• Wages: W_t ← W_t · L/(1 − u), which is unchanged when η = 0 (v74:27).
• Profits are recomputed as Π = Y − W, and profit tax is recomputed with the same ramps (v74:28–30). Revenue, profit after tax and output are overwritten (v74:31–33).
• Ambiguity: the overwritten real_output_index is Y/P (v74:31), which is not ×100-normalized as it is in v71. Because base output is 100, the scale happens to coincide.

4.2 Investment and firm cash (t > 0)

• Investment is a residual from the resource identity: I_t = Y_t − G_t − ΣC_k − Σmaintenance (CCM98:128).
• Firm cash: F ← F − I + net equity cash (CCM98:129–130). Net equity cash is the net household purchases of units at q, i.e. issuance minus redemption.
• Capital: K ← K + I/P (CCM98:131).
• Profits are fully paid out, so operating cash equals C + G − W − T − D = −I. That is why only I and equity flows move firm cash.

4.3 Corporate credit (corporate_credit_ledger_v98.py; terms at corporate_credit_v98.py:11)

• service, at the start of t > 0 (ledger:4–13; CCM98:82):

- Interest due = rate × claims; paid = min(F, due). - Principal = min(remaining F, amortization × claims). - Unpaid interest is capitalized pro rata.

• advance, after investment (ledger:15–20; CCM98:132):

- If F < 0, draw = min(−F, Σ positive household cash, limit − outstanding). - The draw is taken pro rata from household cash, which becomes claims. There is no money creation.

• Wealth consolidation nets the claims against equity holders (CCM98:149).
• TERMS, as (limit, rate, amortization): disabled (0, .04, .1), limited_20 (20, .04, .1), limited_60 (60, .04, .1), rate_08 (60, .08, .1).

4.4 Workout (CWM100; corporate_workout_ledger_v100.py)

• A year counts as missed if capitalized interest > 1e-8 or principal paid + 1e-8 < amortization × opening claims (CWM100:140–141).
• When the streak reaches workout_years ∈ {1, 2, 3} and claims > 1e-8, a debt-for-equity exchange takes place at q (CWM100:142–144):

- Enterprise value V = q × Σunits. - Recovery = min(V, D). - Old holders keep a fraction max(0, 1 − D/V). - Lenders receive Σunits · (recovery/V) · claim_k/D. - Lender mark loss = claim · (1 − recovery/D). - No cash moves and total units are unchanged. Both properties are asserted at workout ledger:4–18.

• After an exchange, credit is closed and the advance limit is 0 (CWM100:135).
• Order of steps: the workout check runs after the failure check and before consumer resolution (CWM100:136–146).
• Fixed terms are limit 60, rate .04, amortization .1 (corporate_workout_v100.py:16). With workout_years = 0 (no workout) the run is identical to limited_60 (test_corporate_workout_v100.py:22–23; asserted for completion at thesis_synthesis_v101.py:31–32).

5. Stop conditions, completion and control

Failure reasons are exact strings, checked in this order:

1. 'No outstanding equity claims': Σunits ≤ 1e-12 (CCM98:60).
2. 'Zero equity quote: liquidation unavailable': q ≤ 1e-12 (CCM98:62). This cannot occur under constant_real, since P ≥ 0.7 > 0.
3. 'Existing government commitments lack cash financing': treasury < −1e-8 (CCM98:76).
4. 'Lender lacks cash/equity to finance foreclosure services and borrower surplus': raised by ResolutionFundingError (ledger:72–73; CCM98:94–95).
5. 'Corporate liquidity, real capital or equity-redemption capacity exhausted': after credit advance, firm cash < −1e-8, K < −1e-8, any cohort's units < −1e-8, or Σunits ≤ 1e-12 (CCM98:133–134).

• Completed means no failure and the last row has year = 20 (CCM98:158). Failed paths are truncated and never imputed.
• Control (control=True, CCM98:44) sets terminal_unemployment = 0 and productivity_gain = 0. As a result u ≡ 0, e ≡ 1, P ≡ 1 and no benefits are paid. The control keeps the tax-rate and capture ramps, ownership, tenure and stress. The repo itself labels it "no-displacement/no-productivity control under matched policies, not a no-policy-change control" (macro_sensitivity_v96.py:63).
• Consequence: because the capture ramp is kept, a control with κ̄ = .5 has revenue 12 + .25·.5·40 = 17, which is below G + interest = 20.2 + 1.8. So many controls stop on reason 3.

6. Outcomes, variants and grid

• Consumption index: 100 · (C_k/MASS_k/P_t) / (0.9 · initial_after_housing_k) (CCM98:150). This is per-capita real non-housing consumption relative to the cohort's own year-0 consumption, so it equals 100 at t = 0. It is None if the year-0 after-housing income is ≤ 0.
• Terminal real consumption: C_k/MASS_k/P at t = 20 (consumption_real). It is None unless the path completed (v96:39).
• **preserves_90_all_years:** true when the index is non-null and ≥ 90 − 1e-8 in all 21 years. It is None if the path is not completed (v96:41, :64).
• Matched-control gap: actual minus control terminal real consumption, computed only when both paths completed (v96:49–50).
• The 576-case grid (FACTORS, v96:10–14) is the full factorial 3·3·2·2·2·4·2 = 576:

- productivity_gain {.25, .5, 1.} - pass_through {0., .5, 1.} - profit_tax_rate {.25, .35} - capture_share {.5, 1.} - ownership {concentrated, broad} - tenure {renter, owner_free, mortgage_fixed, mortgage_reset} - stress {stable, rate_shock}

• Fixed in the grid (v96:62):

- α = .3, η = 0; - saving = income_share, quote = constant_real; - terminal unemployment .2, horizon 20 years; - resolution on, recourse 0.

• Seven variants (v101:7, :28–29): no_credit (= disabled), credit_20_04, credit_60_04, credit_60_08, and workout_1, workout_2, workout_3 (60/.04/.1 credit followed by an exchange after 1, 2 or 3 missed years).
• Each variant is run as actual and control, giving 576 × 7 × 2 paths. Cases are matched by exact parameter tuple; the script asserts 576 cases in each source (v101:22–24).
• v101 per-cohort classification (v101:10–17), based on the actual paths only:

- no_complete_variant; - partial_completion_unresolved (some variants incomplete); - preserved_in_all; - not_preserved_in_any; - varies_across_complete_variants.

• Gap signs are computed only when all 14 paths of a case complete (v101:34, :38).
• Recorded counts, for context only (read from the stored JSON, not re-run): 202 cases complete in all 7 variants, 18 in some, 356 in none, and 42 are fully paired.

7. Accounting checks and tests

• Money identity: Σ household cash + firm cash + treasury − initial money (= 20 + 30), recorded each year (CCM98:151). The maximum over the path is reported as max_money_error (CCM98:159).
• The v98 and v100 drivers assert max_money_error < 1e-8 and corporate-credit balance_error < 1e-8 on every path (corporate_credit_v98.py:27–28; corporate_workout_v100.py:26–27).
• balance_error is closing claims − (opening + capitalized − principal + draw − converted) (CCM98:152; CWM100:163).
• The exchange asserts unit and value conservation (workout ledger:14–15).
• Housing cash_transfer_error is recorded (ledger:77) but not asserted anywhere.
• Tests (all 13 pass; run here with python -m unittest):

- test_macro_sensitivity_v96.py: control equals an explicit zero-transition run; money error < 1e-8; imposed u path; Y = G + C + I for t > 0 (line 22); failure leads to null terminal outcomes. - test_corporate_credit_v98.py: advance and service arithmetic; disabled reproduces v96; money and credit balances; claims net to zero against equity shares. - test_corporate_workout_v100.py: solvent and underwater exchange waterfalls; workout 0 equals v98 limited_60; no money creation; no draws after a workout. - test_thesis_synthesis_v101.py: a truncated path can never be classified as preserved or failed.

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B. Empirical pipeline (descriptive, flagged causal_claims_allowed: False)

1. Data sources

• Enterprise AI adoption: Eurostat isoc_eb_ai, indicator E_AI_TANY (enterprise uses at least one AI technology), unit PC_ENT (% of enterprises). Coverage: enterprises with 10+ employees (size_emp=GE10), NACE C10-S951_X_K, annual 2023–2025, 14 countries (AT BE CZ DE DK ES FI FR IE IT NL PL PT SE), 42 observations. Three observations carry the b (break) flag: FR-2023, NL-2025, SE-2023 (data/processed/eurostat_ai_14countries_manifest_v148.json).
• Occupation employment: Eurostat LFS lfsa_egai2d, in thousands of persons (THS_PER), ages 15–64, both sexes, ISCO-08 two-digit, 2018–2025, the same 14 countries. The file has 4,816 rows, 259 of them missing, covering 43 occupation groups (eurostat_occupation_verified_manifest_v166.json).
• Adjacent-year pairs (occupation_break_policy_v168.py:9–35): 4,214 pairs. A pair is eligible for the primary analysis unless:

- it spans 2020→2021 (IESS break); - either year's flag contains b or u; - employment is missing. - Pairs with only a d flag stay eligible.

• Exposure: ILO Gmyrek et al. (2025), "Generative AI and Jobs: A Refined Global Index of Occupational Exposure", workbook Final_Scores_ISCO08_Gmyrek_et_al_2025.xlsx from the GitHub repo pgmyrek/2025_GenAI_scores_ISCO08 (review_ilo_exposure_workbook_v177.py:10). The 2-digit exposure is the unweighted mean of mean_score_2025 over 427 four-digit occupations, giving 40 groups (aggregate_ilo_exposure_v180.py:30–39). ISCO 01–03 (armed forces) have no score (ilo_eurostat_occupation_panel_v183.manifest.json).

2. Sample construction (ai_adoption_exposure_panel_v190.py:15–52)

• Keep pairs with end year 2024 or 2025: 1,204 pairs (v190:34). Exclusions are applied sequentially:

• Final sample: N = 848 (405 with end year 2024, 443 with end year 2025): 13 countries, 39 occupations, 23 country-year cells.
• France drops out entirely because of LFS b flags in both transitions. DK-2024 is also excluded by b flags. The 74 adoption-flag exclusions are the NL-2025 and SE-2024 cells. These counts are reproduced by the v191 manifest and test.

3. Variables

• g_cot = 100·(L_end/L_start − 1): annual employment growth in percent (v190:46).
• E_o ∈ [0, 1]: ILO 2025 exposure, fixed over time.
• ΔA_ct = A_ct − A_c,t−1: change in adoption in percentage points (v190:47).
• Regressor: E_o × ΔA_ct (v190:48).
• Sample statistics (computed here): ΔA ranges 0.77–14.45 pp; mean g = 1.04 and SD = 8.22.

4. Estimating equation (ai_adoption_exposure_interaction_v192.py:77–92)

g_cot = α + β (E_o · ΔA_ct) + γ_ct + δ_o + ε_cot.

• Estimated by OLS with dummy-variable fixed effects: country-year (22 dummies) and occupation (38 dummies), one reference category dropped from each (v192:84–86). The country-year effects absorb ΔA and the occupation effects absorb E_o.
• A rank check is applied (v192:87). Minimum coverage is 500 rows, 30 occupations and 20 country-year cells (v192:80).
• Standard errors are cluster-robust by occupation (39 clusters), using a normal approximation (use_t=False) and statsmodels' default cluster small-sample correction (v192:88).
• Recorded result (data/processed/ai_adoption_exposure_interaction_results_v194.json): β = −0.5449, SE 0.5427, p = 0.315, 95% CI [−1.609, 0.519].

5. Robustness (ai_adoption_interaction_robustness_v195.py:14–35)

The same estimator is run on:

• (a) Matched-cell panel: country×occupation cells observed in both 2024 and 2025 (v195:17–22): 368 cells, N = 736.
• (b) Leave-one-country-out: 13 fits (v195:25–28).
• (c) Leave-one-occupation-out: 39 fits (v195:29–32).

The v195 output is archived in data/processed/ai_adoption_interaction_robustness_v195.json (see AI_ADOPTION_ROBUSTNESS_V195_RESULTS.md). An independent numpy replica of the cluster-robust OLS reproduces both v194 and the archived v195 numbers.

No specification reaches p < 0.05, and the sign never changes.

The tests (test_ai_adoption_interaction_v192.py, test_ai_adoption_interaction_robustness_v195.py at the repo root) only check that the design strings are present. They do not check the numbers.

6. Points to state as limitations or ambiguities

1. The sim uses v71 only for production and revenue; government debt dynamics come from the no-borrowing settlement.
2. Displaced employment is hard-coded as 1 − u/.2.
3. The nominal consumer loan versus the falling price level is a built-in channel.
4. Investment is a residual, not a decision rule.
5. The control keeps the policy ramps.
6. The v195 numbers were checked twice: archived CI output and an independent replica agree.
7. Exposure is unweighted and fixed in 2025; adoption is measured at the country level and contemporaneous with the employment change.