IDEAS home Printed from https://ideas.repec.org/p/cop/wpaper/g-265.html
   My bibliography  Save this paper

A CGE model for India with an application on the effects of eliminating agricultural subsidies

Author

Listed:
  • Peter B. Dixon
  • Maureen T. Rimmer
  • Rajesh Chadha
  • Devender Pratap
  • Anjali Tandon

Abstract

Because of its flexibility and realism, CGE has gradually become the dominant form of economy-wide modelling (modelling that provides industry disaggregation in a quantitative description of the whole economy). Over the last 50 years, CGE models have been used in the analysis of an enormous variety of policy-relevant questions. This paper describes the construction and initial application of the first version of the NCAER-VU CGE model of India. We describe in detail our process of transforming input-output data published by India Statistics into a form suitable for CGE modelling. We have also expended considerable effort in processing data on agricultural land use with the aim of facilitating applications concerned with agricultural policy. As an illustrative simulation, we investigate the effects of removing or modifying agricultural subsidies (which account for about 2.5 per cent of Indian GDP). We find that these subsidies inflict a GDP dead-weight loss of about 0.20%, but do not contribute to the objective of supporting farm income. However, if subsidies to Fertilizer and Electricity used by agriculture were phased out and replaced with additional production and sales subsidies, then real farm income would be increased by about 4% with no deterioration in the public sector budget, almost no effect on food security, and small increases in GDP and overall welfare.

Suggested Citation

  • Peter B. Dixon & Maureen T. Rimmer & Rajesh Chadha & Devender Pratap & Anjali Tandon, 2016. "A CGE model for India with an application on the effects of eliminating agricultural subsidies," Centre of Policy Studies/IMPACT Centre Working Papers g-265, Victoria University, Centre of Policy Studies/IMPACT Centre.
    • Handle: RePEc:cop:wpaper:g-265
    as

    Download full text from publisher

    File URL: https://www.copsmodels.com/ftp/workpapr/g-265.pdf
    File Function: Initial version, 2016-11
    Download Restriction: no
    File URL: https://www.copsmodels.com/elecpapr/g-265.htm
    File Function: Local abstract: may link to additional material.
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Dixon, Peter B. & Koopman, Robert B. & Rimmer, Maureen T., 2013. "The MONASH Style of Computable General Equilibrium Modeling: A Framework for Practical Policy Analysis," Handbook of Computable General Equilibrium Modeling, in: Peter B. Dixon & Dale Jorgenson (ed.), Handbook of Computable General Equilibrium Modeling, edition 1, volume 1, chapter 0, pages 23-103, Elsevier.
    2. Mariano, Marc Jim M. & Giesecke, James A., 2014. "The macroeconomic and food security implications of price interventions in the Philippine rice market," Economic Modelling, Elsevier, vol. 37(C), pages 350-361.
    3. Powell, Alan A. & Snape, Richard H., 1993. "The contribution of applied general equilibrium analysis to policy reform in Australia," Journal of Policy Modeling, Elsevier, vol. 15(4), pages 393-414, August.
    4. Dixon, Peter B. & Rimmer, Maureen T., 2013. "Validation in Computable General Equilibrium Modeling," Handbook of Computable General Equilibrium Modeling, in: Peter B. Dixon & Dale Jorgenson (ed.), Handbook of Computable General Equilibrium Modeling, edition 1, volume 1, chapter 0, pages 1271-1330, Elsevier.
    5. James A. Giesecke & Nhi Hoang Tran & Erwin L. Corong & Steven Jaffee, 2013. "Rice Land Designation Policy in Vietnam and the Implications of Policy Reform for Food Security and Economic Welfare," Journal of Development Studies, Taylor & Francis Journals, vol. 49(9), pages 1202-1218, September.
    6. Burfisher,Mary E., 2011. "Introduction to Computable General Equilibrium Models," Cambridge Books, Cambridge University Press, number 9780521139779, December.
    7. Marc Jim M. Mariano & James A. Giesecke & Nhi H. Tran, 2015. "The effects of domestic rice market interventions outside business-as-usual conditions for imported rice prices," Applied Economics, Taylor & Francis Journals, vol. 47(8), pages 809-832, February.
    8. Burfisher,Mary E., 2011. "Introduction to Computable General Equilibrium Models," Cambridge Books, Cambridge University Press, number 9780521766968, December.
    Full references (including those not matched with items on IDEAS)

    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. Dixon, Peter & Rimmer, Maureen & Chadha, Rajesh & Pratap, Devender & Tandon, Anjali, 2015. "A CGE model for India with an application on the effects of eliminating agricultural subsidies," Conference papers 332661, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    2. Marc Jim M. Mariano & James A. Giesecke, 2016. "Forecasting development outcomes under alternative surplus labour assumptions," Applied Economics, Taylor & Francis Journals, vol. 48(42), pages 4019-4032, September.
    3. Xin Zhao & Dominique Y van der Mensbrugghe & Roman M. Keeney & Wallace E. Tyner, 2021. "Improving the Way Land Use Change is Handled in Economic Models," World Scientific Book Chapters, in: Peter Dixon & Joseph Francois & Dominique van der Mensbrugghe (ed.), POLICY ANALYSIS AND MODELING OF THE GLOBAL ECONOMY A Festschrift Celebrating Thomas Hertel, chapter 15, pages 467-515, World Scientific Publishing Co. Pte. Ltd..
    4. Zhao, Xin & van der Mensbrugghe, Dominique & Tyner, Wally, 2017. "Modeling land physically in CGE models: new insights on intensive and extensive margins," Conference papers 332816, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    5. Zhao, Xin & Van Der Mensbrugghe, Dominique & Tyner, Wallace E., 2017. "Modeling land physically in CGE models: new insights on intensive and extensive margins," 2017 Annual Meeting, July 30-August 1, Chicago, Illinois 258363, Agricultural and Applied Economics Association.
    6. Rose, Adam & Chen, Zhenhua & Wei, Dan & Prager, Fynn, 2015. "Estimating the Macroeconomic Impacts of U.S. Anti-Dumping Enforcement," Conference papers 332572, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    7. Adam Rose & Zhenhua Chen & Dan Wei, 2023. "The economic impacts of Russia–Ukraine War export disruptions of grain commodities," Applied Economic Perspectives and Policy, John Wiley & Sons, vol. 45(2), pages 645-665, June.
    8. MASSIANI, Jérôme, 2022. "Computable General Equilibrium assessment of mega-events: Issues and possible solutions," Journal of Policy Modeling, Elsevier, vol. 44(5), pages 920-942.
    9. Peter B. Dixon & Maureen T. Rimmer & Daniel Mason-D'Croz, 2020. "Computable general equilibrium simulations of the effects on the U.S. economy of reductions in beef consumption," Centre of Policy Studies/IMPACT Centre Working Papers g-311, Victoria University, Centre of Policy Studies/IMPACT Centre.
    10. Zahniser, Steven & Hertz, Thomas & Dixon, Peter B. & Rimmer, Maureen T., 2017. "The Potential Effects of Increased Demand for U.S. Agricultural Exports on Metro and Nonmetro Employment," Economic Research Report 262186, United States Department of Agriculture, Economic Research Service.
    11. M. Alejandro Cardenete & M. Carmen Lima & Ferran Sancho, 2013. "Are There Key Sectors? An Appraisal Using Applied General Equilibrium," The Review of Regional Studies, Southern Regional Science Association, vol. 43(2,3), pages 111-129, Winter.
    12. Cai, Yiyong & Newth, David & Finnigan, John & Gunasekera, Don, 2015. "A hybrid energy-economy model for global integrated assessment of climate change, carbon mitigation and energy transformation," Applied Energy, Elsevier, vol. 148(C), pages 381-395.
    13. Fiorini, Matteo; Lebrand, Mathilde, 2016. "The Political Economy of Services Trade Agreements," Economics Working Papers ECO2016/05, European University Institute.
    14. Wang, X. & Dietrich, J.P. & Lotze-Campen, H. & Biewald, A. & Munson, T.S. & Muller, C., 2018. "Trading More Food in the Context of High-end Climate Change: Implications for Land Displacement through Agricultural Trade," 2018 Conference, July 28-August 2, 2018, Vancouver, British Columbia 276997, International Association of Agricultural Economists.
    15. Mario A. Fernandez & Adam J. Daigneault, 2018. "Money Does Grow On Trees: Impacts Of The Paris Agreement On The New Zealand Economy," Climate Change Economics (CCE), World Scientific Publishing Co. Pte. Ltd., vol. 9(03), pages 1-23, August.
    16. Oscar Bajo-Rubio & Antonio G. Gómez-Plana, 2015. "Alternative strategies to reduce public deficits: Taxes vs. spending," Journal of Applied Economics, Universidad del CEMA, vol. 18, pages 45-70, May.
    17. Ramón E. Key-Hernández & Claudina Villarroel, 2014. "Domestic impact of production cuts in OPEC countries: The cases of Nigeria and Venezuela," EcoMod2014 7007, EcoMod.
    18. Vanzetti, David & Pham, Huong Thi Lan, 2015. "Trade Liberalisation and Rural Poverty in Vietnam," Conference papers 332662, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    19. Orlov, Anton, 2015. "An assessment of optimal gas pricing in Russia: A CGE approach," Energy Economics, Elsevier, vol. 49(C), pages 492-506.
    20. Leone Walters & Heinrich R. Bohlmann & Matthew W. Clance, 2016. "The Impact of the COMESA-EAC-SADC Tripartite Free Trade Agreement on the South African Economy," Working Papers 201669, University of Pretoria, Department of Economics.

    More about this item

    Keywords

    fertilizer subsidies; electricity subsidies; India; CGE model;
    All these keywords.

    JEL classification:

    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • Q18 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Policy; Food Policy; Animal Welfare Policy
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies

    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:cop:wpaper:g-265. 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: Mark Horridge (email available below). General contact details of provider: https://edirc.repec.org/data/cpmonau.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.