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GTAP Resource #1246

"Feeding the World via Transfer Payments – A General Equilibrium Approach"
by Lips, Markus

Following the Sixth World Food Survey of the Food and Agriculture Organization of the United Nations (FAO) more than 800 million people go hungry.
This paper illustrates an unconventional approach to providing adequate nourishment. The basic idea is for OECD member countries to introduce an income tax to finance sufficient nourishment. The tax is paid in a fund. Countries with a prevalence of food inadequacy receive transfer payments from said fund to increase their food budgets. The analysis aims to answer the questions how high the general income tax has to be in order to finance sufficient nourishment all over the world.
For this analysis two changes to the standard GTAP model are required. For one, the mechanism of transfer payments has to be implemented. Also, it is necessary to introduce nutrition information into the model. We use the per capita Dietary Energy Supply (DES) measurement from the FAO, which describes the available amount of kilo calories per person and day. A coefficient is introduced to connect this information with the spending on raw and processed food products of the private household in the GTAP data base.
We use an aggregation of the GTAP 5 data base with nine regions. Four of them show a per capita DES level below 2800 kilo calories. Based on calculations by FAO we assume, that the prevalence of food inadequacy is eliminated if the mentioned per capita DES level is reached. Consequently, the per capita DES level of all four regions is shocked in the simulation.
The resulting general income tax in the OECD countries is 0.83 percent. In absolute terms, this means a transfer payment of 167 billion USD. This amount is comparable with the 232 billion USD, which were spent by the OECD countries in 1997 on domestic support for their agricultural sectors alone.
The receiver countries increase their domestic production as well as augment their food imports. In the OECD countries agricultural production would increase moderately while the prices of agricultural goods would rise slightly.
The paper includes also a discussion about the simplistic assumptions used.

Resource Details (Export Citation) GTAP Keywords
Category: 2003 Conference Paper
Status: Published
By/In: Presented at the 6th Annual Conference on Global Economic Analysis, The Hague, The Netherlands
Date: 2003
Created: Lips, M. (4/29/2003)
Updated: Bacou, M. (4/30/2003)
Visits: 3,440
- Economic development

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