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Extending the GTAP Data Base and Model to Cover Domestic Support Issues using the EU as Example

Kirsten Boysen-Urban, Hans Jensen () and Martina Brockmeier

GTAP Technical Papers from Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University

Abstract: The EU Single Farm Payment (SFP) is currently distributed in proportion to primary factor shares in version 8 of the GTAP database. In this paper, we investigate whether this way of modeling the EU SFP makes a difference in analyzing agricultural policy reforms. To do so, we create alternative versions of the GTAP database to compare the effects with the default setting in GTAP. Employing OECD data, along with the GTAP framework, we vary the assumptions about the allocation of the SFP. In the process, we demonstrate how to alter and update the GTAP database to implement domestic support of OECD PSE tables. We provide a detailed overview supplemented with assumptions of payment allocation, shock calculations and in particular, the Altertax procedure to update value flows and price equations extended in the GTAP model. Subsequently, we illustrate the impact of those assumptions by simulating a 100% removal of the SFP using the deviating versions of GTAP database. This sensitivity analysis reveals strong differences in results, but particularly in production responses of food and agricultural sectors that decrease with an increasing degree of decoupling. Furthermore, our analysis shows that the effect on welfare and the trade balance decreases with an increasing degree of decoupling. This experiment shows that the allocation of the SFP can have strong impacts on simulation results.

Date: 2014
New Economics Papers: this item is included in nep-agr, nep-cmp and nep-eur
Note: GTAP Technical Paper No. 35
References: Add references at CitEc
Citations: View citations in EconPapers (6) Track citations by RSS feed

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