Semi-subsistence Farm Households and Their Implications for Policy Response

Semi-subsistence households play a considerable role in production and consumption in developing countries with a great part of consumption by these households is contributed by home production for home consumption (HPHC). However, this dual role of households in these countries as producers and consumers in a non-separable fashion has been under represented in most social accounting matrices for such countries and economy wide behavioural models (such as CGE models). This study bases itself on a SAM that has been developed for a typical developing economy which explicitly identifies a variant of HPHC and marketed commodities, and explicitly treats households as activities. The behavioural relationships in a CGE model, a variant of STAGE, are modified to conform to these features of semi-subsistence economies. Based on the modified SAM and CGE model, this study examines the implications for policy responses of semi-subsistence households with a focus on changes in border prices for commodities and trade and transport margins. The result shows that these policy and external shocks have considerable differential implications on the consumption and production decisions and welfares of different groups of representative households depending on the degree to which these households are insulated from the external and policy shocks as explained by their relative dependence on HPHC.