Introducing medium-and long-term productivity responses in Aglink-Cosimo

This report aims at enhancing the Aglink-Cosimo model by incorporating agricultural productivity growth. It contains a first attempt to develop a measure of the productivity response of agricultural commodities represented in Aglink-Cosimo. In the report we first present how productivity growth is considered at present in the model. Subsequently, we review the literature on how technical progress and price elasticities of yield relate to yield growth. From the literature, we extract a way of capturing endogenously productivity growth. We document the Aglink-Cosimo model changes and focus on some specific cases. Finally, we prepare a scenario analysis on the actual baseline and on an economy with a higher GDP growth rate. The scenario, applied to both cases, studies the effect of a 20% labour price increase on endogenous productivity growth.