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A Critical Assessment of Supply-Demand Models of Agricultural Trade

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  • Everett B. Peterson
  • Thomas W. Hertel
  • James V. Stout

Abstract

We offer a critical assessment of static, deterministic, reduced form, supply-demand (SD) models of agricultural trade. A commonly used and well-documented model has significant limitations: no explicit treatment of factor mobility between farm and nonfarm sectors, nonzero profits in some sectors, no substitutability among feedstuffs in livestock sectors, violation of the law of one price, small marketing margins for some commodities, and incomplete coverage of the agricultural sector. Such limitations have significant impacts on the magnitude and direction of projected world price and welfare changes. We believe agricultural policy analysis should first focus on the remediation of these limitations before proceeding to more complex issues like dynamics and uncertainty.

Suggested Citation

  • Everett B. Peterson & Thomas W. Hertel & James V. Stout, 1994. "A Critical Assessment of Supply-Demand Models of Agricultural Trade," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 76(4), pages 709-721.
    • Handle: RePEc:oup:ajagec:v:76:y:1994:i:4:p:709-721.
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    File URL: http://hdl.handle.net/10.2307/1243733
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    Citations

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    Cited by:

    1. Karl D. Meilke & Don McClatchy & Harry de Gorter, 1996. "Challenges in quantitative economic analysis in support of multilateral trade negotiations," Agricultural Economics, International Association of Agricultural Economists, vol. 14(3), pages 185-200, August.
    2. Bergtold, Jason S. & Akobundu, Eberechukwu & Peterson, Everett B., 2004. "The FAST Method: Estimating Unconditional Demand Elasticities for Processed Foods in the Presence of Fixed Effects," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 29(2), pages 1-20, August.
    3. Tao Xiang & Jikun Huang & d’Artis Kancs & Scott Rozelle & Jo Swinnen, 2012. "Food Standards and Welfare: General Equilibrium Effects," Journal of Agricultural Economics, Wiley Blackwell, vol. 63(2), pages 223-244, June.
    4. A. T. Blake & A. J. Rayner & G. V. Reed, 1999. "A Computable General Equilibrium Analysis of Agricultural Liberalisation: The Uruguay Round and Common Agricultural Policy Reform," Journal of Agricultural Economics, Wiley Blackwell, vol. 50(3), pages 400-424, September.

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