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To Trade or Not to Trade? Non-Separable Farm Household Models in Partial and General Equilibrium

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  • Lofgren, Hans
  • Robinson, Sherman

Abstract

Empirical evidence and microeconomic theory suggest that, in many settings, farm household production and consumption decisions are "non-separable." Non-separability may have important policy implications, including lack of response or threshold effects when incentives change. This paper extends the literature in two ways. First, we develop a non-separable farm household model with transaction costs and endogenous choice of market "regime" (surplus, self-sufficiency, or deficit) for production-consumption items (commodities and factors that are both demanded and supplied by the household). Second, we embed this household model in an economy-wide computable general equilibrium model which is formulated as a mixed-complementarity problem. Simulations with a model based on data for a stylized, low-income, Sub-Saharan African country show that the proposed formulation enhances our ability to analyze the impact of exogenous changes on African farmers.

Suggested Citation

  • Lofgren, Hans & Robinson, Sherman, 1999. "To Trade or Not to Trade? Non-Separable Farm Household Models in Partial and General Equilibrium," TMD Discussion Papers 97557, CGIAR, International Food Policy Research Institute (IFPRI).
    • Handle: RePEc:ags:iffp23:97557
    DOI: 10.22004/ag.econ.97557
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    References listed on IDEAS

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    1. Rutherford, Thomas F., 1995. "Extension of GAMS for complementarity problems arising in applied economic analysis," Journal of Economic Dynamics and Control, Elsevier, vol. 19(8), pages 1299-1324, November.
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    3. Lofgren, Hans & Robinson, Sherman, 1997. "The mixed-complementary approach to specifying agricultural supply in computable general equilibrium models," TMD discussion papers 20, International Food Policy Research Institute (IFPRI).
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    5. Lofgren, Hans & Robinson, Sherman, 1997. "The mixed-complementary approach to specifying agricultural supply in computable general equilibrium models," TMD Discussion Papers 97688, CGIAR, International Food Policy Research Institute (IFPRI).
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    7. Lopez, Ramon E., 1984. "Estimating labor supply and production decisions of self-employed farm producers," European Economic Review, Elsevier, vol. 24(1), pages 61-82.
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    2. Jann Lay, 2010. "Sequential macro-micro modelling with behavioural microsimulations," International Journal of Microsimulation, International Microsimulation Association, vol. 3(1), pages 24-34.
    3. Mduma, John K. & Wobst, Peter, "undated". "Village Level Labor Market Development in Tanzania: Evidence from Spatial Econometrics," Discussion Papers 276260, University of Bonn, Center for Development Research (ZEF).
    4. Latruffe, Laure & Davidova, Sophia & Desjeux, Yann, "undated". "Perpetuation of subsistence farming in Western Balkans: the role of factor market imperfections," 82nd Annual Conference, March 31 - April 2, 2008, Royal Agricultural College, Cirencester, UK 36860, Agricultural Economics Society.
    5. Aragie, Emerta A. & McDonald, Scott, 2023. "The economic consequences of price support policies in semi-subsistence economies," Journal of Policy Modeling, Elsevier, vol. 45(6), pages 1148-1166.
    6. Findeis, Jill L. & Swaminathan, Hema & Jayaraman, Anuja, 2003. "Agricultural Household-Firm Units: Adjustments to Change," Policy Reform and Adjustment Workshop, October 23-25, 2003, Imperial College London, Wye Campus 15738, International Agricultural Policy Reform and Adjustment Project (IAPRAP).
    7. Ayambila, Sylvester Nsobire, 2014. "The Determinants of Non-Farm Micro and Small Enterprise Employment and Financial Performance in Ghana," Miscellaneous Publications 358829, University of Ghana, Institute of Statistical Social & Economic Research (ISSER).
    8. Mamoudou Ba & Amar Anwar & Mazhar Mughal, 2021. "Non‐farm employment and poverty reduction in Mauritania," Journal of International Development, John Wiley & Sons, Ltd., vol. 33(3), pages 490-514, April.
    9. Brooks, Jonathan & Melyukhina, Olga, 2003. "The Effects of Agricultural Policy Reform on Poverty in Brazil," Policy Reform and Adjustment Workshop, October 23-25, 2003, Imperial College London, Wye Campus 15752, International Agricultural Policy Reform and Adjustment Project (IAPRAP).
    10. McCulloch, Neil, 2003. "The impact of structural reforms on poverty : a simple methodology with extensions," Policy Research Working Paper Series 3124, The World Bank.
    11. Minot, Nicholas, 1999. "Effects of transaction costs on supply response and marketed surplus: simulations using non-separable household models," MTID discussion papers 36, International Food Policy Research Institute (IFPRI).

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