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GTAP Resources: Frequently Asked Question Details

Subject: Variable "to" defined with regards to "POS"

Question: I am a new user of the standard GTAP model, which I am using to simulate a removal of EU argicultural subsidies on different EU agricultural sectors. Would it be possible for you to answer a couple of short questions that I have?

1) How is the variable "to" defined with regards to "POS" found in chapter 10C of the GTAP 7 documentation?

2) Is there a variable that corresponds directly to "POS"?

3) How is it that "to" is positive for certain agricultural subsectors, such as wheat in EU_25?

Answer: Please note that chapter 10.C corresponds to GTAP 7 Data Base, but if you are using GTAP 7.1 Data Base you should refer to 10G for EU agricultural subsidies. The variable "to(I,r)" that you see in the GTAP model is the % change in the power of subsidy (power = 1+ rate of subsidy).

To see the levels of subsidy rates, you can look at the header rTO in gsdtax.har in the database.

This is calculated by dividing the output subsidies by total output for each sector. POS mentioned in the documentation gives the total power of support in all categories. However, rTO may be obtained merely by the following steps:

1. Multiply the (POS-1) by total pre-tax output VOA (you can get this from CM04 of gsdview.har). This will give you the total subsidies in the sector.

2. Multiply the total payment obtained above by the %share of output subsidies divided by 100. This will give you actual output subsidy payments.

3. Divide the output subsidy payments by total output and multiply by 100 to get rTO.

There is no variable or coefficient in the model or database that corresponds to POS. It is merely to give the users an idea about the total support in the database, but holds less significance in terms of simulations, where you’d actually want to target output subsidies, factor subsidies or input subsidies.

TO is positive for many sectors because there are subsidies in them. You may want to check with the initial data presented in chapter 10G to see the level of subsidies in the contributed data.

Source: E-mail Message

Date Added: 5/12/2011