Agricultural economy/Description: Difference between revisions

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The MAGNET model [[Woltjer et al., 2011]] is based on the standard GTAP model (Hertel, 1997]], which is a multi-regional, static, applied computable general equilibrium (CGE) model based on neoclassical microeconomic theory. Although it covers the entire economy, there is a special focus on agricultural sectors. The MAGNET model is a further development of GTAP regarding land use, household consumption, livestock, food, feed and energy crop production, and emission reduction cost calculations.  
The MAGNET model [[Woltjer et al., 2011]] is based on the standard GTAP model (Hertel, 1997]], which is a multi-regional, static, applied computable general equilibrium (CGE) model based on neoclassical microeconomic theory. Although it covers the entire economy, there is a special focus on agricultural sectors. The MAGNET model is a further development of GTAP regarding land use, household consumption, livestock, food, feed and energy crop production, and emission reduction cost calculations.  


=== Demand and supply ===: Household demand for agricultural products is calculated as a function of income, income elasticities, price elasticities, and cross-price elasticities. Income elasticities for agricultural commodities are consistent with FAO estimates (Britz 2003), and dynamically depend on purchasing power parity corrected GDP per capita. The supply of all commodities is modelled by an input–output structure that explicitly links the production of goods and services for final consumption via different stages of processing back to primary goods (crops and livestock products) and resources. At each production level, input of labour, capital, and intermediate input or resources (e.g. land) can substitute each other. For example, labour, capital and land are input factors in crop production, and substitution of these production factors is driven by changes in their relative prices. If the price of one input factor increases, it is substituted by other factors, following the price elasticity of substitution.  
=== Demand and supply: ===  
Household demand for agricultural products is calculated as a function of income, income elasticities, price elasticities, and cross-price elasticities. Income elasticities for agricultural commodities are consistent with FAO estimates (Britz 2003), and dynamically depend on purchasing power parity corrected GDP per capita. The supply of all commodities is modelled by an input–output structure that explicitly links the production of goods and services for final consumption via different stages of processing back to primary goods (crops and livestock products) and resources. At each production level, input of labour, capital, and intermediate input or resources (e.g. land) can substitute each other. For example, labour, capital and land are input factors in crop production, and substitution of these production factors is driven by changes in their relative prices. If the price of one input factor increases, it is substituted by other factors, following the price elasticity of substitution.  


=== Regional aggregation and trade ===: MAGNET is flexible in its regional aggregation (129 regions). For the link with IMAGE, it distinguishes single European countries and, in addition to Europe, 22 large world regions, closely matching the regions in IMAGE (Figure zzz IMAGE regions). Similar to most other CGE models, MAGNET assumes that products traded internationally are differentiated according to country of origin, i.e. domestic and foreign products are not fully identical, but are imperfect substitutes (the so-called Armington assumption (Armington 1969)).   
=== Regional aggregation and trade ===: MAGNET is flexible in its regional aggregation (129 regions). For the link with IMAGE, it distinguishes single European countries and, in addition to Europe, 22 large world regions, closely matching the regions in IMAGE (Figure zzz IMAGE regions). Similar to most other CGE models, MAGNET assumes that products traded internationally are differentiated according to country of origin, i.e. domestic and foreign products are not fully identical, but are imperfect substitutes (the so-called Armington assumption (Armington 1969)).   

Revision as of 17:03, 5 December 2013

Link to framework components overview

Parts of Agricultural economy/Description

  1. Introduction page
  2. Model description
  3. Policy issues
  4. Data, uncertainty and limitations
  5. Overview of references
Component is implemented in:
Components:
Related IMAGE components
Projects/Applications
Key publications
References
MAGNET- the agro-economic model in IMAGE 3.0
Flowchart Agricultural economy. See also the Input/Output Table on the introduction page.

Model description of Agricultural economy

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