Comparing supply‐side specifications in models of global agriculture and the food system

This article compares the theoretical and functional specification of production in partial equilibrium (PE) and computable general equilibrium (CGE) models of the global agricultural and food system included in the AgMIP model comparison study. The two model families differ in their scope—partial versus economy‐wide—and in how they represent technology and the behavior of supply and demand in markets. The CGE models are “deep” structural models in that they explicitly solve the maximization problem of consumers and producers, assuming utility maximization and profit maximization with production/cost functions that include all factor inputs. The PE models divide into two groups on the supply side: (1) “shallow” structural models, which essentially specify area/yield supply functions with no explicit maximization behavior, and (2) “deep” structural models that provide a detailed activity‐analysis specification of technology and explicit optimizing behavior by producers. While the models vary in their specifications of technology, both within and between the PE and CGE families, we consider two stylized theoretical models to compare the behavior of crop yields and supply functions in CGE models with their behavior in shallow structural PE models. We find that the theoretical responsiveness of supply to changes in prices can be similar, depending on parameter choices that define the behavior of implicit supply functions over the domain of applicability defined by the common scenarios used in the AgMIP comparisons. In practice, however, the applied models are more complex and differ in their empirical sensitivity to variations in specification—comparability of results given parameter choices is an empirical question. To illustrate the issues, sensitivity analysis is done with one global CGE model, MAGNET, to indicate how the results vary with different specification of technical change, and how they compare with the results from PE models.     

Welfare‐at‐Risk and Extreme Dependency of Regional Wheat Yields: Implications of a Stochastic CGE Model

Stochastic computable general equilibrium (CGE) models have ignored regional correlations in agricultural yields, assuming random shocks to be independent between regions. This could lead to misinterpretation of simulation outputs which ignore extreme positive or negative harvests at the global scale. We develop a multi‐regional CGE model which allows for five types of interregional correlation between wheat yields to analyse the vulnerability of countries against fluctuating international markets, focusing on Value at Risk (VaR) and extreme dependency. We find that global welfare risks could be underestimated by up to 33% if significant interregional correlations in yield shocks are not taken into account. Egypt, Kazakhstan, Ukraine, the former Soviet Union and Northern Africa are particularly vulnerable to global volatilities in terms of economic welfare.     

Labour-saving technologies in smallholder agriculture: An economy-wide model with field operations

Labour-saving technologies are relevant for agricultural development. Yet, as this study shows, they are poorly integrated into agricultural production functions of economy-wide models. We report a computable general equilibrium (CGE) model, which explicitly incorporating field operations (e.g. land preparation, weeding or harvesting) in the context of smallholder agriculture. The field operations approach allows to model technological trade-offs in organic and conventional production systems at various stages of the agricultural production process. Simulating a structural change scenario, we compare the performance of the field operations approach with published benchmark production structures by assessing how they replicate empirically observed changes in land and agrochemical use. This benchmark analysis shows that incorporating field operations replicates the observed empirical changes most accurately and allows for more realistic modelling of labour-saving technologies. We use the field operations model to investigate three policy options to mitigate labour shortages in the agricultural sector of Bhutan. Permitting the employment of Indian workers in agriculture has the highest short-term potential in this respect. We find that subsidising agricultural machinery hiring services and removing import tariffs on agrochemical inputs are found to be less effective. Further options for model developments, such as combining field operations and labour market seasonality, are highlighted.     

Agent‐based Modelling of Climate Adaptation and Mitigation Options in Agriculture

Computer simulation models can provide valuable insights for climate‐related analysis and help streamline policy interventions for improved adaptation and mitigation in agriculture. Computable general equilibrium (CGE) and partial equilibrium (PE) models are currently being expanded to include land‐use change and energy markets so that the effects of various policy measures on agricultural production can be assessed. Agent‐based modelling (ABM) or multi‐agent systems (MAS) have been suggested as a complementary tool for assessing farmer responses to climate change in agriculture and how these are affected by policies. MAS applied to agricultural systems draw on techniques used for Recursive Farm Programming, but include models of all individual farms, their spatial interactions and the natural environment. In this article, we discuss the specific insights MAS provide for developing robust policies and land‐use strategies in response to climate change. We show that MAS are well‐suited for uncertainty analysis and can thereby complement existing simulation approaches to advance the understanding and implementation of effective climate‐related policies in agriculture.     

A Computable General Equilibrium Analysis of Agricultural Liberalisation: The Uruguay Round and Common Agricultural Policy Reform

This paper uses a computable general equilibrium model to assess the effects of the Uruguay Round (UR) and CAP reform. Detailed attention is given to the impact of the agricultural components of the UR and of the CAP reform on the agricultural and food-processing sectors of the EU. The CGE model used, while based on the standard Global Trade Analysis Project (GTAP) model, uses a more detailed representation of the UR and CAP policy changes than is usual in GTAP analyses of the UR effects. In so doing it assumes a degree of specificity of factors used in agriculture and makes appropriate agricultural policy variables endogenous. Finally, it assesses the consequences of assuming imperfect competition in all non-agricultural sectors.     

Trade policy, biotechnology and grain self-sufficiency in China

Over the past 20 years the growth of China's agricultural economy has been extraordinary. However, it seems unlikely that China will maintain self‐sufficiency in grains by 2005 without substantial intervention. We develop a CGE model to assess the options available to Chinese policy makers. We compare the welfare effects of import tariffs and domestic support, and explore the potential of biotechnology as a means to achieve self‐sufficiency through improvements in agricultural productivity. Our results indicate that the price interventions that would be required to maintain China's desired self‐sufficiency ratios are considerable, and are unlikely to be compatible with WTO accession. The productivity improvements required are also significant, and likely beyond the current potential of biotechnology.     

Broad‐based Agricultural Development versus Food Self‐sufficiency: A General Equilibrium Analysis in India

Intersectoral linkages are analysed using a CGE model based on a SAM constructed from Indian national accounts data for 1988–89. The model includes the rural non‐farm sector, public sector production and aspects of public policy. Evidence supports the arguments of Chakravarty (1987) and Ahluwalia (1986) regarding the importance of broad‐based agricultural development as opposed to increased production in the food sector alone aimed at achieving food self‐sufficiency.     

The effects of direct storage subsidies under limited rationality: a general equilibrium analysis

We study here the effects of a public subsidy to private storage set up at world level. To simulate the welfare effects and impacts on market fluctuations of this subsidy, we use a dynamic Computable General Equilibrium model assuming imperfect expectations. We also perform different statistical analysis based on our CGE results and show that the storage subsidy can have the undesired effect of destabilizing agricultural markets, depending on the form of economic agents’ price expectations and on the structure of the shocks impacting the agricultural production.     

Contrasting Quantitative and Qualitative Approaches to Rural Development Analysis: The Case of Agricultural Intensification in Lebanon

While peripheral rural regions in Lebanon face typical problems of lagging development and economic marginalisation, they have not been regarded as a priority for policy‐makers. Local extensionists have encouraged technological innovation as a means of improving farmers’ livelihoods, and this has led to increasing input use and an intensification of agricultural production. This paper applies contrasting quantitative and qualitative methodologies to analyse the effects of such changes at the level of the overall economy of Lebanon and also to explore the impacts on rural households. A computable general equilibrium (CGE) model simulates shocks in which agricultural output increases due to different types of intensification. The results are contrasted at local level through the use of qualitative case study analysis carried out in the Hermel district of northeast Lebanon. Quantitative simulations indicate that, while agricultural intensification has a positive effect overall on the Lebanese economy, the effects on rural households and the income of farmers are negative. The case‐study interviews demonstrate that, at local level, agricultural trade liberalisation, increased agricultural output and greater volatility of commodity prices have resulted in farmers opting for lower input use and more secure market forms of production.     

Developing Countries and the Gains from Regionalism: Links between Trade and Farm Policy Reforms in Mexico

We use a multi–country computable general equilibrium (CGE) model with agricultural policy details to simulate the effects of North American Free Trade Agreement (NAFTA). We find that Mexico gains from NAFTA only when it also removes domestic distortions in agriculture. In that case, agriculture can generate allocative efficiency gains large enough to offset the terms of trade losses that arise because Mexico has higher initial tariffs than its NAFTA partners. When an RTA forces a developing country to reform its domestic distortions that are linked to trade restrictions, it becomes a building block toward multilateralism.     

The Impact of Pillar II Funding: Validation from a Modelling and Evaluation Perspective

We extend the Common Agricultural Policy Regionalised Impact Modelling System (CAPRI) with a regional computational general equilibrium (CGE) model to estimate the effects of the Pillar II of the Common Agricultural Policy. Our aim is to assess the modeling approach by comparing the scenario results with observations from the evaluation reports for rural development, supplemented with expert interviews and findings from the literature. For this purpose, an ex‐post scenario is developed for Germany that models the effect of the Pillar II measures in 2006. We observe a moderate impact, namely, an increase in agricultural income (5%) and agricultural land use (0.15%), particularly grassland, and a substitution of arable land with grassland. This effect leads to a total increase in agricultural production, particularly of beef, and to an increase in total greenhouse gas emissions and total nitrogen surplus for Germany. Greenhouse gas emissions and nutrient surpluses per ha, however, are reduced. We observe that farm investment programmes displace private investment. The evaluation reports confirm the moderate impact and our major results, as does the comparison with other literature. However, the conclusions about agri‐environment measures and their impact on income differ. The most important difference between our results and the evaluation reports and majority of the present literature is that we also quantify the joint effect between the whole economy and policy measures, with some contradictory effects.     

Higher fuel and food prices: impacts and responses for Mozambique

Rising world prices for fuel and food represent a negative terms‐of‐trade shock for Mozambique. The impacts of these price rises are analyzed using various approaches. Detailed price data show that the world price increases are being transmitted to domestic prices. Short‐run net benefit ratio analysis indicates that urban households and households in the southern region are more vulnerable to food price increases. Rural households, particularly in the North and Center, often benefit from being in a net seller position. Longer‐term analysis using a computable general equilibrium (CGE) model of Mozambique indicates that the fuel price shock dominates rising food prices from both macroeconomic and poverty perspectives. Again, negative impacts are larger in urban areas. The importance of agricultural production response in general and export response in particular is highlighted. Policy analysis reveals difficult trade‐offs between short‐run mitigation and long‐run growth. Improved agricultural productivity has powerful positive impacts, but remains difficult to achieve and may not address the immediate impacts of higher prices.     

A CALIBRATION METHOD FOR AGRICULTURAL ECONOMIC PRODUCTION MODELS

A method for calibrating agricultural production models is presented. The data requirements are those for a linear programming model with the addition of elasticities of substitution. Using these data, production models with a CES production function can be simply and automatically calibrated using small computers. The resulting models are shown to satisfy the standard microeconomic conditions. When used for analysis of policy changes, the CES models are able to respond smoothly to changes in prices or constraints. Prior estimates of elasticities of substitution, supply or demand can be incorporated in the models.     

Livestock intensification as a climate policy: Lessons from the Brazilian case

Brazil is trying to identify ways to ally economic growth with climate change mitigation. Productivity gains in livestock have been pointed out as a promising alternative to achieve that goal. Thus, this paper analyses the economic impacts of a policy of productivity gains in the Brazilian livestock. Besides, we evaluate if the policy may conciliate agricultural growth and deforestation control, bearing in mind the reduction of greenhouse gas (GHG) emissions from land-use changes. The analysis was carried out through a computable general equilibrium (CGE) model, tailored to represent land-use changes, GHG emissions and removals. Besides, it made progress modeling the heterogeneity of climate, soils, and emissions in inter-regional models with many regions. The results show that productivity gains can effectively “save” land and thus avoid deforestation, especially in the Amazon and Cerrado (savannah) biomes. The policy also may boost the economic growth, spreading it to other regions of Brazil, like Centre-West and North, and increasing income and consumption in those places. However, as a climate policy, focused on the reduction of GHG emissions, the results may be counterproductive. The net amount issued may increase, as a result of the positive stimulus of the policy on the economy, and GHG emissions are directly related to the economic growth.     

Gender norms and intrahousehold allocation of labor in Mozambique: A CGE application to household and agricultural economics

We model intrahousehold dynamics in two rural provinces of Mozambique through the lens of computable general equilibrium (CGE) methods. The main features of our modeling framework are as follows: (a) a household social accounting matrix that captures allocation of labor and resources, and transfers among household members; (b) the explicit use of social norms in labor allocation across gender; (c) a mechanism that links agricultural production to time poverty; (d) identification of leisure as a commodity that is being produced. Simulation results and sensitivity analyses show how social norms interact with the allocation of labor and resources at the household level to impact farm production or limit the gains from technological improvements.     

Bioeconomic modelling – An application of environmentally adjusted economic accounts and the computable general equilibrium model

Building on the current international discourse and United Nation's System of Environmental-Economic Accounting (SEEA) this study provides further empirical evidences on how failure to include natural capital resources in national accounting leads to erroneous calculation of macroeconomic estimates. The SEEA methodological framework for integrating natural capital into the System of National Accounts amplifies analytical power of computable general equilibrium (CGE) models and allows to investigate relationship between the economy and the environment. This paper integrates values of natural capital into Supply and Use Tables (SUTs) to illustrate depletion of forest due to natural disaster. It further applies CGE model to demonstrate economy-wide effects of a real event in which hurricane felled almost 80 thousands hectares of trees in Polish forests in 2017. The model results corresponds with the statistical data published after the mentioned event. Furthermore they align with findings of previous studies, which applied different methodical approach and show that without natural capital accounting the macroeconomic estimates provide misleading information about economic performance.     

Land‐use change trajectories up to 2050: insights from a global agro‐economic model comparison

Changes in agricultural land use have important implications for environmental services. Previous studies of agricultural land‐use futures have been published indicating large uncertainty due to different model assumptions and methodologies. In this article we present a first comprehensive comparison of global agro‐economic models that have harmonized drivers of population, GDP, and biophysical yields. The comparison allows us to ask two research questions: (1) How much cropland will be used under different socioeconomic and climate change scenarios? (2) How can differences in model results be explained? The comparison includes four partial and six general equilibrium models that differ in how they model land supply and amount of potentially available land. We analyze results of two different socioeconomic scenarios and three climate scenarios (one with constant climate). Most models (7 out of 10) project an increase of cropland of 10–25% by 2050 compared to 2005 (under constant climate), but one model projects a decrease. Pasture land expands in some models, which increase the treat on natural vegetation further. Across all models most of the cropland expansion takes place in South America and sub‐Saharan Africa. In general, the strongest differences in model results are related to differences in the costs of land expansion, the endogenous productivity responses, and the assumptions about potential cropland.     

Climate change adaptation in agriculture: A computable general equilibrium analysis of land-use change in Nepal

This paper investigates the feasibility of changes in cropland-use as an adaptation strategy to minimise the economy-wide costs of climate change on agriculture. Nepal makes an interesting case study as it is one of the most vulnerable agricultural economies within South Asia. We develop a comparative static multi-household computable general equilibrium (CGE) model for Nepal, with a nested set of constant elasticity of transformation (CET) functional forms, to model the allocation of land within different agricultural sectors. Land transformation elasticities in these CET functions are allowed to reflect the ease of switching from one crop to another based on their agronomic characteristics. The results suggest that, in the long run, farmers in Nepal tend to allocate land to crops that are comparatively less impacted by climate change, such as paddy, thereby minimising the economy-wide impacts of climate change. Furthermore, the results reveal that land-use change tends to reduce the income disparity between different household groups by significantly moderating the income losses of marginal farmers. Therefore, it is suggested that policy makers in Nepal should prioritise schemes such as providing climate-smart paddy varieties (i.e., those that are resistant to heat, drought and floods) to farmers, subsidising fertilizers, improving agronomic practices, and educating farmers to switch from crops that are highly impacted by climate change to those that are not, such as paddy.     

Economic and Household Impacts of Projected Policy Changes for the Irish Agri‐food Sector

The policy environment for the Irish agri‐food sector could change rapidly in the coming decade. A potentially positive factor will be the elimination of milk quotas in 2015, although a potentially negative factor will be further trade liberalisation and increased import competition. These changes come on top of the move to decouple direct aids to farmers in 2005 as part of the Mid‐Term Review of the EU's Common Agricultural Policy agreed in 2003. This paper examines these reforms and their impacts on the Irish economy and income distribution using a CGE model particularly rich in detail on the agri‐food sectors, differentiated household groups, and agricultural policy instruments including their links to productive factors and households. The results suggest that the past and projected changes in the policy environment have, in sum, a small positive impact on GDP and household income. However, the gains and losses are unequally distributed across sectors and household groups due to the highly differentiated distribution of support and protection. Although all households generally gain from the sequence of policy reforms in the long run, some experience strong adverse effects from particular reforms and in the medium term.