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GTAP Resources: Resource Display

GTAP Resource #6059

"Simulating effects of agricultural support policies under price volatility using a computable general equilibrium model—a China case study"
by Cao, Liangyue, Sally Thorpe and James Fell

This study uses a dynamic GTAP-type CGE model to simulate the economic effects of different agricultural support policies to the price volatility of agristaples, using China as a case study.

The modelling captured China’s agricultural policies which provide a price band for rice and wheat, that is, a floor price for producers and a ceiling price for consumers. Various policies were examined, including the existing policies, deficiency payments, various land subsidies, lump sum transfers as well as the removal of all policies. To examine these policies, a baseline was first developed, which calibrated the model to exogenous projections on GDP, population and other variables to 2050. For each policy option, a number of temporary shocks on domestic and world production of rice, wheat and coarse grains were used to induce price volatility, with the aim of assessing the performance of each policy at managing the impacts of price volatility on farmers and households.

The combined modelling results from all shocks present a clear picture: overall, the existing policy settings in China have adverse impacts on food security and there are better alternatives available to help address rural-urban income disparities. The non-distortionary policies examined (i.e., deficiency payments, food vouchers, lump sum transfers to agricultural households, and the ‘removal of all policies’) improve the efficiency of the overall Chinese economy. Among these policy alternatives, the ‘removal of all policies’ option offers the highest potential economic gains. However, if applied in isolation, it also creates the largest adverse effects on agricultural households. Despite this finding, such adverse effects can be addressed through a direct lump sum transfer to agricultural households. Such a policy with the direct lump sum transfer also has limited negative effects on the potential efficiency gains possible, resulting in a win-win policy for all households and China overall.

Resource Details (Export Citation) GTAP Keywords
Category: 2020 Conference Paper
Status: Published
By/In: Presented during the 23rd Annual Conference on Global Economic Analysis (Virtual Conference)
Date: 2020
Created: Cao, L. (4/15/2020)
Updated: Cao, L. (6/15/2020)
Visits: 755
- Dynamic modeling
- Agricultural policies
- Domestic policy analysis
- Food prices and food security
- Asia (East)
- Oceania

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