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On the optimal implementation of agricultural policy reforms

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  • Féménia, Fabienne
  • Gohin, Alexandre

Abstract

Economic analyses of farm policies generally focus on long run, steady state impacts while the transition dynamics are often overlooked. In this paper we develop a determinist dynamic computable general equilibrium analysis allowing agents to form adaptive versus perfect expectations. Using an illustrative CAP reform scenario, we simulate an abrupt versus a gradual implementation of this reform. Our results show that if economic agents are able to perfectly anticipate the impacts of the reform, delaying its implementation is never optimal. On the other hand, if agents gradually learn from market developments, we find some cases where a gradual implementation of this reform is welfare improving. Such gradual implementation allows minimizing adjustment costs.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Policy Modeling.

Volume (Year): 35 (2013)
Issue (Month): 1 ()
Pages: 61-74

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Handle: RePEc:eee:jpolmo:v:35:y:2013:i:1:p:61-74

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Web page: http://www.elsevier.com/locate/inca/505735

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Keywords: Dynamics; Europe; Farm policies; Welfare;

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  1. Psaltopoulos, Demetris & Balamou, Eudokia & Skuras, Dimitris & Ratinger, Tomas & Sieber, Stefan, 2011. "Modelling the impacts of CAP Pillar 1 and 2 measures on local economies in Europe: Testing a case study-based CGE-model approach," Journal of Policy Modeling, Elsevier, vol. 33(1), pages 53-69, January.
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  8. Devarajan, Shantayanan & Go, Delfin S., 1998. "The Simplest Dynamic General-Equilibrium Model of an Open Economy," Journal of Policy Modeling, Elsevier, vol. 20(6), pages 677-714, December.
  9. Hommes, Cars H., 1994. "Dynamics of the cobweb model with adaptive expectations and nonlinear supply and demand," Journal of Economic Behavior & Organization, Elsevier, vol. 24(3), pages 315-335, August.
  10. Yanagida, John F. & Azzam, Azzeddine & Linsenmeyer, Dean, 1987. "Two alternative methods of removing price supports: Implications to the U.S. corn and livestock industries," Journal of Policy Modeling, Elsevier, vol. 9(2), pages 311-320.
  11. Keen, Michael, 1990. "Welfare analysis and intertemporal substitution," Journal of Public Economics, Elsevier, vol. 42(1), pages 47-66, June.
  12. Levy, Santiago & van Wijnbergen, Sweder, 1995. "Transition Problems in Economic Reform: Agriculture in the North American Free Trade Agreement," American Economic Review, American Economic Association, vol. 85(4), pages 738-54, September.
  13. Ballard, Charles L, 1987. "Tax Policy and Consumer Foresight: A General Equilibrium Simulation Study," Economic Inquiry, Western Economic Association International, vol. 25(2), pages 267-84, April.
  14. Keeney, Roman & Thomas Hertel, 2005. "GTAP-AGR : A Framework for Assessing the Implications of Multilateral Changes in Agricultural Policies," GTAP Technical Papers 1869, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University.
  15. Perali, Federico & Pieroni, Luca & Standardi, Gabriele, 2012. "World tariff liberalization in agriculture: An assessment using a global CGE trade model for EU15 regions," Journal of Policy Modeling, Elsevier, vol. 34(2), pages 155-180.
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