To Trade or Not to Trade? Non-Separable Farm Household Models in Partial and General Equilibrium

Hans Lofgren and Sherman Robinson

No 97557, TMD Discussion Papers from CGIAR, International Food Policy Research Institute (IFPRI)

Abstract: Empirical evidence and microeconomic theory suggest that, in many settings, farm household production and consumption decisions are "non-separable." Non-separability may have important policy implications, including lack of response or threshold effects when incentives change. This paper extends the literature in two ways. First, we develop a non-separable farm household model with transaction costs and endogenous choice of market "regime" (surplus, self-sufficiency, or deficit) for production-consumption items (commodities and factors that are both demanded and supplied by the household). Second, we embed this household model in an economy-wide computable general equilibrium model which is formulated as a mixed-complementarity problem. Simulations with a model based on data for a stylized, low-income, Sub-Saharan African country show that the proposed formulation enhances our ability to analyze the impact of exogenous changes on African farmers.

Keywords: Consumer/Household; Economics (search for similar items in EconPapers)
Pages: 34
Date: 1999-01
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Persistent link: https://EconPapers.repec.org/RePEc:ags:iffp23:97557

DOI: 10.22004/ag.econ.97557

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