System dynamic model of industry: growth factors and analysis of optimal strategies

The paper presents a system dynamic model of economic flows in industry developed in IThink. The model allows one to study the influence of investor strategies and state tax policy on industrial growth rates taking into account depreciation of fixed assets and profitability. Modeling has shown that industry is based on the potential for nonlinear growth, but acceleration requires significant time and conditions. An important factor is the level of wear: with high depreciation, a significant part of investments is directed to maintaining capacities, and only net investments ensure expansion. It has been revealed that the effectiveness of state policy is determined by the planning horizon: with a short-term horizon (up to 15 years), it is profitable for the state to set high taxes, but with an increase in the horizon to 30 years, the situation changes - a tax rate of 20% becomes optimal, contributing to the growth of the industry and tax revenues. The key factor of growth is the behavior of investors: with a short-term strategy, they accumulate profits, but lose growth potential and receive significantly less profit in the long term. Long-term strategies of investors allow for a multiple increase in total income. Such investors are beneficial to the state, since they contribute to the sustainable growth of the industry, modernization, and an increase in the tax base. Thus, the coordination of long-term strategies of the state and investors is a condition for industrial development.

system dynamics, industrial growth, investment strategies, planning horizont