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GTAP Resource #4460

"Taking into account the evolution of world food demand in CGE simulations of policy reforms: the role of demand systems"
by Bouët, Antoine, Fabienne Femenia and David Laborde

- Context

Computable General Equilibrium (CGE) models are often used to simulate the effects of political reforms, notably in agricultural sectors. Those effects are usually expressed in terms of deviation from a baseline, status quo, scenario. The evolution of markets in this baseline is of particular importance. Yet, the current world economic situation will undoubtedly evolve dramatically in the forthcoming years, even if economic policies remain unchanged. This is particularly true for some developing countries like China or India, where incomes are expected to keep growing for several years. Since the level of food consumption is a crucial parameter when one gets interested in the effects of agricultural policy or trade reforms, the way the growth of income can impact the level, but also the structure, of households demand for agricultural commodities has to be taken into account as accurately as possible. Furthermore, even if policy reforms impacting agricultural sectors do not have much impact on income levels (agriculture generally represents a small part of GDP), they can have huge impacts on agricultural prices. So, in the same way as the impact of income growth on households’ demand has to be taken into account as accurately as possible in the baselines used in CGE models, the way this demand react to price changes is of crucial importance when one wants to simulate the effect of political reforms in agricultural sectors.
Yet, functional forms used to model households’ demand in CGE models do not necessarily exhibit enough flexibility to fully represent the effects of income and price changes on the structure of this demand. Actually, there are some trade-offs between the flexibility of income and price responses of the systems on one side, and their regularity and ease of calibration on the other side. Our objective in this study is to empirically compare the results generated by a CGE using different demand functions, to and see if the additio...

Resource Details (Export Citation) GTAP Keywords
Category: 2014 Conference Paper
Status: Published
By/In: Presented at the 17th Annual Conference on Global Economic Analysis, Dakar, Senegal
Date: 2014
Version: 1
Created: Femenia, F. (4/15/2014)
Updated: Femenia, F. (4/15/2014)
Visits: 2,646
- Baseline development
- Economic growth
- Asia (South-Central)

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