Agricultural economy/Description: Difference between revisions
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Household demand is calculated as a function of income, income elasticities, price elasticities, and cross-price elasticities. Income elasticities for agricultural commodities are consistent with [[hasAcronym::FAO]] estimates ([[Britz, 2003]]), and dynamically depend on purchasing power parity ([[hasAcronym::PPP]]) corrected real GDP per capita. The change in indirect demand for food (e.g. via the service sector) follows the change in direct household demand. The supply of all commodities is modelled by an input–output structure that explicitly links industries for goods and services for consumption via different stages of processing back to primary goods (crops and livestock products) and resources. In the model, a representative producer for each sector of a country or region makes production decisions to maximise profit by choosing inputs of labour, capital, and intermediates. Changes in relative prices for inputs lead to a substitution between inputs, following their elasticity of substitution. | Household demand is calculated as a function of income, income elasticities, price elasticities, and cross-price elasticities. Income elasticities for agricultural commodities are consistent with [[hasAcronym::FAO]] estimates ([[Britz, 2003]]), and dynamically depend on purchasing power parity ([[hasAcronym::PPP]]) corrected real GDP per capita. The change in indirect demand for food (e.g. via the service sector) follows the change in direct household demand. The supply of all commodities is modelled by an input–output structure that explicitly links industries for goods and services for consumption via different stages of processing back to primary goods (crops and livestock products) and resources. In the model, a representative producer for each sector of a country or region makes production decisions to maximise profit by choosing inputs of labour, capital, and intermediates. Changes in relative prices for inputs lead to a substitution between inputs, following their elasticity of substitution. | ||
===Regional aggregation and trade=== | ===Regional aggregation and trade=== | ||
MAGNET distinguishes single European countries and, outside Europe, 22 large world regions, closely matching the IMAGE regions [[IMAGE region (background category]]. 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 perfectly identical, but imperfect substitutes (the so-called Armington assumption ([[Armington, 1969]]). | MAGNET distinguishes single European countries and, outside Europe, 22 large world regions, closely matching the IMAGE regions [[IMAGE region (background category)]]. 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 perfectly identical, but imperfect substitutes (the so-called Armington assumption ([[Armington, 1969]]). | ||
===Land use=== | ===Land use=== | ||
Additional to the standard GTAP model, MAGNET includes a dynamic land supply function ([[van Meijl, 2006]]) which accounts for the availability and suitability of land for agricultural use, based on information from IMAGE (see below, and [[Media:Flow_diagram_MAGNET.png|Flow diagram MAGNET]]) ). A nested land use structure accounts for the different degrees of substitutability between types of land use ([[Huang, 2004]];[[van Meijl, 2006]]), and includes an imperfect mobility of capital and labour between agricultural and non-agricultural sectors ([[Hertel, 2003]]). In addition, the MAGNET model includes international and EU agricultural policies, such as quota and import tariffs ([[Helming, 2010]]). | Additional to the standard GTAP model, MAGNET includes a dynamic land supply function ([[van Meijl, 2006]]) which accounts for the availability and suitability of land for agricultural use, based on information from IMAGE (see below, and [[Media:Flow_diagram_MAGNET.png|Flow diagram MAGNET]]) ). A nested land use structure accounts for the different degrees of substitutability between types of land use ([[Huang, 2004]];[[van Meijl, 2006]]), and includes an imperfect mobility of capital and labour between agricultural and non-agricultural sectors ([[Hertel, 2003]]). In addition, the MAGNET model includes international and EU agricultural policies, such as quota and import tariffs ([[Helming, 2010]]). | ||