IDEAS home Printed from https://ideas.repec.org/p/ags/iatr10/91285.html
   My bibliography  Save this paper

On The Optimal Implementation Of Agricultural Policy Reforms

Author

Listed:
  • Femenia, Fabienne
  • Gohin, Alexandre

Abstract

Economic analyses of farm policies generally focus on the 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 imperfect versus pefect 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, then delaying its implementation is never optimal. On the other hand, if agents gradually learn from market developments, then we find some cases where a gradual implementation of this reform is welfare improving. Such gradual implementation allows minimizing adjustment costs.

Suggested Citation

  • Femenia, Fabienne & Gohin, Alexandre, 2010. "On The Optimal Implementation Of Agricultural Policy Reforms," 2010: Climate Change in World Agriculture: Mitigation, Adaptation, Trade and Food Security, June 2010, Stuttgart-Hohenheim, Germany 91285, International Agricultural Trade Research Consortium.
  • Handle: RePEc:ags:iatr10:91285
    DOI: 10.22004/ag.econ.91285
    as

    Download full text from publisher

    File URL: https://ageconsearch.umn.edu/record/91285/files/Femenia_et_al._IATRC_Summer_2010.pdf
    Download Restriction: no

    File URL: https://libkey.io/10.22004/ag.econ.91285?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Nerlove, Marc & Bessler, David A., 2001. "Expectations, information and dynamics," Handbook of Agricultural Economics, in: B. L. Gardner & G. C. Rausser (ed.), Handbook of Agricultural Economics, edition 1, volume 1, chapter 3, pages 155-206, Elsevier.
    2. Diao, Xinshen & Somwaru, Agapi, 2000. "An Inquiry on General Equilibrium Effects of MERCOSUR--An Intertemporal World Model," Journal of Policy Modeling, Elsevier, vol. 22(5), pages 557-588, September.
    3. Hector Calvo-Pardo, 2009. "Are the antiglobalists right? Gains-from-trade without a Walrasian auctioneer," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 38(3), pages 561-592, March.
    4. Marc Nerlove, 1958. "Adaptive Expectations and Cobweb Phenomena," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 72(2), pages 227-240.
    5. 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.
    6. 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.
    7. Grandmont, Jean-Michel, 1993. "Temporary general equilibrium theory," Handbook of Mathematical Economics, in: K. J. Arrow & M.D. Intriligator (ed.), Handbook of Mathematical Economics, edition 4, volume 2, chapter 19, pages 879-922, Elsevier.
    8. 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.
    9. 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 738-754, September.
    10. Keen, Michael, 1990. "Welfare analysis and intertemporal substitution," Journal of Public Economics, Elsevier, vol. 42(1), pages 47-66, June.
    11. Ballard, Charles L, 1987. "Tax Policy and Consumer Foresight: A General Equilibrium Simulation Study," Economic Inquiry, Western Economic Association International, vol. 25(2), pages 267-284, April.
    12. Haggard, Stephan & Webb, Steven B, 1993. "What Do We Know about the Political Economy of Economic Policy Reform?," The World Bank Research Observer, World Bank, vol. 8(2), pages 143-168, July.
    13. 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.
    14. 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.
    15. 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.
    16. Pereira, Alfredo M. & Shoven, John B., 1988. "Survey of dynamic computational general equilibrium models for tax policy evaluation," Journal of Policy Modeling, Elsevier, vol. 10(3), pages 401-436.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Femenia, Fabienne, 2012. "Should private storage be subsidized to stabilize agricultural markets once price support schemes are removed? A General Equilibrium analysis applied to European reforms," Conference papers 330253, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    2. Owen, P. Dorian & Winchester, Niven, 2014. "The impact of US fresh milk production standards on dairy trade," Journal of Policy Modeling, Elsevier, vol. 36(6), pages 1008-1021.
    3. Gohin, Alexandre & Zheng, Yu, 2015. "Assessing the Market Impacts of the Common Agricultural Policy: Does Farmers’ Risk Attitude Matter?," 2015: Trade and Societal Well-Being, December 13-15, 2015, Clearwater Beach, Florida 229235, International Agricultural Trade Research Consortium.
    4. Feil, Jan-Henning & Musshoff, Oliver & Roeren-Wiemers, Tobias, 2014. "Farm level effects of policy reforms in Germany: First empirical evidence," Journal of Policy Modeling, Elsevier, vol. 36(6), pages 1036-1047.
    5. Femenia, Fabienne & Latruffe, Laure & Chavas, Jean-Paul, 2017. "Responsiveness of farm investment to price changes: An empirical study of the French crop sector," 2017 International Congress, August 28-September 1, 2017, Parma, Italy 261421, European Association of Agricultural Economists.
    6. Irena Benešová & Helena Řezbová & Luboš Smutka & Karel Tomšík & Adriana Laputková, 2015. "European Sugar Market - Impact of Quota System," Acta Universitatis Agriculturae et Silviculturae Mendelianae Brunensis, Mendel University Press, vol. 63(6), pages 1825-1838.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Féménia, Fabienne & Gohin, Alexandre, 2011. "Dynamic modelling of agricultural policies: The role of expectation schemes," Economic Modelling, Elsevier, vol. 28(4), pages 1950-1958, July.
    2. Christophe Gouel, 2012. "Agricultural Price Instability: A Survey Of Competing Explanations And Remedies," Journal of Economic Surveys, Wiley Blackwell, vol. 26(1), pages 129-156, February.
    3. Femenia, Fabienne, 2012. "Should private storage be subsidized to stabilize agricultural markets once price support schemes are removed? A General Equilibrium analysis applied to European reforms," Conference papers 330253, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    4. Fausto, Cavalli, 2016. "A cobweb model with alternating demand and supply functions," Working Papers 325, University of Milano-Bicocca, Department of Economics, revised 07 Feb 2016.
    5. Beckman, Jayson & Burfisher, Mary & Mitchell, Lorraine & Arita, Shawn, 2021. "Hidden obstacles to trade: The case of the EU’s Ban on beef hormones," Journal of Policy Modeling, Elsevier, vol. 43(6), pages 1332-1343.
    6. Cees Diks & Cars Hommes & Valentyn Panchenko & Roy Weide, 2008. "E&F Chaos: A User Friendly Software Package for Nonlinear Economic Dynamics," Computational Economics, Springer;Society for Computational Economics, vol. 32(1), pages 221-244, September.
    7. Zhao, Xin & Calvin, Katherine & Patel, Pralit & Abigail, Snyder & Wise, Marshall & Waldhoff, Stephanie & Hejazi, Mohamad & Edmonds, James, 2021. "Impacts of interannual climate and biophysical variability on global agriculture markets," Conference papers 333245, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    8. Femenia, Fabienne, 2010. "Impacts of Stockholding Behaviour on Agricultural Market Volatility: A Dynamic Computable General Equilibrium Approach," Journal of International Agricultural Trade and Development, Journal of International Agricultural Trade and Development, vol. 59(3).
    9. Mark Partridge & Dan Rickman, 2010. "Computable General Equilibrium (CGE) Modelling for Regional Economic Development Analysis," Regional Studies, Taylor & Francis Journals, vol. 44(10), pages 1311-1328.
    10. Tamotsu Onozaki, 2018. "Nonlinearity, Bounded Rationality, and Heterogeneity," Springer Books, Springer, number 978-4-431-54971-0, December.
    11. Sophie Mitra & Jean‐Marc Boussard, 2012. "A simple model of endogenous agricultural commodity price fluctuations with storage," Agricultural Economics, International Association of Agricultural Economists, vol. 43(1), pages 1-15, January.
    12. Sonnemans, Joep & Hommes, Cars & Tuinstra, Jan & van de Velden, Henk, 2004. "The instability of a heterogeneous cobweb economy: a strategy experiment on expectation formation," Journal of Economic Behavior & Organization, Elsevier, vol. 54(4), pages 453-481, August.
    13. Alfredo M. Pereira, 1995. "Equal Yield Tax Alternatives and Government Deficits," Public Finance Review, , vol. 23(1), pages 40-71, January.
    14. Plassmann, Florenz & Feltenstein, Andrew, 2016. "How large do multi-region models need to be?," Journal of Policy Modeling, Elsevier, vol. 38(1), pages 138-155.
    15. Bröcker, Johannes & Korzhenevych, Artem, 2013. "Forward looking dynamics in spatial CGE modelling," Economic Modelling, Elsevier, vol. 31(C), pages 389-400.
    16. Onozaki, Tamotsu & Sieg, Gernot & Yokoo, Masanori, 2000. "Complex dynamics in a cobweb model with adaptive production adjustment," Journal of Economic Behavior & Organization, Elsevier, vol. 41(2), pages 101-115, February.
    17. Femenia, Fabienne, 2011. "To Subsidize or Not to Subsidize Private Storage? Evaluation of the Effects of Private Storage Subsidies as an Instrument to Stabilize Agricultural Markets After CAP Reforms," 2011 International Congress, August 30-September 2, 2011, Zurich, Switzerland 114360, European Association of Agricultural Economists.
    18. Hommes, Cars & Sonnemans, Joep & Tuinstra, Jan & Van De Velden, Henk, 2007. "Learning In Cobweb Experiments," Macroeconomic Dynamics, Cambridge University Press, vol. 11(S1), pages 8-33, November.
    19. Chaudhry, Muhammad Imran & Katchova, Ani & Miranda, Mario Javier, 2016. "Examining pricing mechanics in the poultry value chain - empirical evidence from Pakistan," 2016 Annual Meeting, July 31-August 2, Boston, Massachusetts 235953, Agricultural and Applied Economics Association.
    20. Colucci, Domenico & Valori, Vincenzo, 2011. "Adaptive expectations and cobweb phenomena: Does heterogeneity matter?," Journal of Economic Dynamics and Control, Elsevier, vol. 35(8), pages 1307-1321, August.

    More about this item

    Keywords

    Agricultural and Food Policy; Political Economy;

    JEL classification:

    • Q18 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Policy; Food Policy; Animal Welfare Policy
    • Q11 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Aggregate Supply and Demand Analysis; Prices
    • D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ags:iatr10:91285. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: AgEcon Search (email available below). General contact details of provider: https://edirc.repec.org/data/iatrcea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.