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General Equilibrium Analysis of the Spatial Impacts of Rural Policy

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  • Thomson, Kenneth J.
  • Psaltopoulos, Demetrios

Abstract

General equilibrium (GE) techniques have recently been used to simulate policy impacts for neighbouring or different rural areas, thus focussing on the important spatial aspect of such policies. A Social Accounting Matrix (SAM) represents production, households, government, etc. in matrix form, while computable GE models introduce greater behavioural flexibility at the cost of parameterisation. Several SAM and CGE models have recently been built for rural regions, while others have tried to represent rural-urban linkages. This paper presents two SAM applications, and one current CGE approach. The first SAM was developed for the analysis of the economic impact of Objective 1 policy on six remote rural areas, including two in Greece. Six specific regional SAMs were used to quantify the growth-generation effects of EU policies and scenarios on these local economies. The second effort used a hybrid three-area SAM for two different rural areas and an adjacent city in Crete to assess the diffusion patterns of economic impacts generated by three types of CAP measure in one of the rural areas. A CGE example, from the ongoing TERA project, seeks to model the determinants of economic agglomeration, and will attempt to cope with rural/urban distance and environmental externalities. Advantages of the SAM approach include its simplicity and availability of data and software. Disadvantages include significant data needs, linear behaviour, no real modelling of growth (development) or price changes, and the fact that some policies apply to many sectors in unknown way. The CGE approach may overcome some of these problems.

Suggested Citation

  • Thomson, Kenneth J. & Psaltopoulos, Demetrios, 2007. "General Equilibrium Analysis of the Spatial Impacts of Rural Policy," 103rd Seminar, April 23-25, 2007, Barcelona, Spain 9402, European Association of Agricultural Economists.
    • Handle: RePEc:ags:eaa103:9402
    DOI: 10.22004/ag.econ.9402
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    References listed on IDEAS

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    1. Roberts, Deborah, 1998. "Rural-Urban Interdependencies: Analysis Using an Inter-Regional SAM Model," European Review of Agricultural Economics, Oxford University Press and the European Agricultural and Applied Economics Publications Foundation, vol. 25(4), pages 506-527.
    2. Peter Midmore, 1998. "Rural Policy Reform and Local Development Programmes: Appropriate Evaluation Procedures," Journal of Agricultural Economics, Wiley Blackwell, vol. 49(3), pages 409-426, September.
    3. Demetrios Psaltopoulos & Eudokia Balamou & Kenneth J. Thomson, 2006. "Rural–Urban Impacts of CAP Measures in Greece: An Inter‐regional SAM Approach," Journal of Agricultural Economics, Wiley Blackwell, vol. 57(3), pages 441-458, September.
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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.
    2. Viaggi, Davide & Bartolini, Fabio & Raggi, Meri & Sardonini, Laura, 2010. "The role of the Common Agricultural Policy in the spatial location of agricultural activities," 116th Seminar, October 27-30, 2010, Parma, Italy 95242, European Association of Agricultural Economists.

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