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The mixed-complementary approach to specifying agricultural supply in computable general equilibrium models:


  • Lofgren, Hans
  • Robinson, Sherman


In Computable General Equilibrium (CGE) models, it is typically assumed that agricultural resources are smoothly substitutable in neoclassical functions, with flexible prices generating market equilibrium in a setting with full resource employment. Such a specification is often inadequate, especially for analyses of agricultural supply issues. With more disaggregation, the use of smooth, twice-differentiable, production or cost functions to specify agricultural technology is increasingly unrealistic. The purpose of this paper is to show how CGE models formulated as mixed-complementarity (MC) problems can incorporate more realistic, specifications of agricultural supply, drawing on the extensive literature on mathematical programming models applied to agriculture. We extend a stylized standard neoclassical CGE model to a CGE-MC model that includes Leontief (activity-analysis) technology, endogenous determination of the market regime for agricultural factors (unemployment or full employment), and inequality constraints on agricultural factor use. In an analysis of reduced agricultural water supplies in Egypt, we show how such a model can generate realistic results concerning water use and productivity that cannot be captured in a standard CGE model. The main conclusion is that, in analyses focused on agricultural supply issues, CGE-MC models that selectively incorporate features from the mathematical-programming literature offer a powerful alternative to standard models.

Suggested Citation

  • 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).
  • Handle: RePEc:fpr:tmddps:20

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    References listed on IDEAS

    1. Chambers,Robert G., 1988. "Applied Production Analysis," Cambridge Books, Cambridge University Press, number 9780521314275, March.
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    Cited by:

    1. Anne Briand, 2008. "Les tarifications au coût marginal versus coût moyen face à des chocs climatiques au Sénégal : un modèle dynamique d’équilibre général calculable appliqué à l’eau," Économie et Prévision, Programme National Persée, vol. 185(4), pages 103-122.
    2. Cororaton, Caesar B., 2004. "Rice Reforms and Poverty in the Philippines: A CGE Analysis," Discussion Papers DP 2004-14, Philippine Institute for Development Studies.
    3. Llop Llop, Maria & Ponce Alifonso, Xavier,, 2012. "Agriculture, technological change and environmental sustainability: Looking for a win-win water policy strategy," Working Papers 2072/203158, Universitat Rovira i Virgili, Department of Economics.
    4. Lofgren, Hans & Robinson, Sherman, 1999. "To trade or not to trade: non-separable farm household models in partial and general equilibrium," TMD discussion papers 37, International Food Policy Research Institute (IFPRI).
    5. Robinson, Sherman & El-Said, Moataz & San, Nu Nu, 1998. "Rice policy, trade, and exchange rate changes in Indonesia: A general equilibrium analysis," Journal of Asian Economics, Elsevier, vol. 9(3), pages 393-423.
    6. Alexandre Gohin & Herve Guyomard & Chantal Le Mouël, 2006. "Tariff protection elimination and Common Agricultural Policy reform: implications of changes in methods of import demand modelling," Applied Economics, Taylor & Francis Journals, vol. 38(13), pages 1527-1539.


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