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: ===  
=== 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.  
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)).   


Land use: In addition to the standard GTAP model, MAGNET  includes a dynamic land supply function (Van Meijl et al. 2006) that accounts for the availability and suitability of land for agricultural use, based on information from IMAGE (see below, and Figure 4.2.1). A nested land-use structure accounts for the different degrees of substitutability between types of land use (Huang et al. 2004; Van Meijl et al. 2006). In addition, the MAGNET model includes international and EU agricultural policies, such as production quota and export\import tariffs  (Helming et al. 2010).  
===Land use===
In addition to the standard GTAP model, MAGNET  includes a dynamic land supply function (Van Meijl et al. 2006) that accounts for the availability and suitability of land for agricultural use, based on information from IMAGE (see below, and Figure 4.2.1). A nested land-use structure accounts for the different degrees of substitutability between types of land use (Huang et al. 2004; Van Meijl et al. 2006). In addition, the MAGNET model includes international and EU agricultural policies, such as production quota and export\import tariffs  (Helming et al. 2010).  


===Biofuel crops===: MAGNET includes ethanol and biodiesel as first-generation biofuels made from wheat, sugar cane, maize, and oilseeds (Banse et al. 2008), and the use of by-products (DDGS, oilcakes) from biofuel production in the livestock sector.
===Biofuel crops===
MAGNET includes ethanol and biodiesel as first-generation biofuels made from wheat, sugar cane, maize, and oilseeds (Banse et al. 2008), and the use of by-products (DDGS, oilcakes) from biofuel production in the livestock sector.


===Livestock===: MAGNET distinguishes the livestock commodities of beef and other ruminant meats, dairy cattle (grass- and crop-fed), and a category ‘other animals’ (e.g. chickens and pigs) that is primarily crop-fed. The modelling of the livestock sector includes different feedstuffs, including feed crops, co-products from biofuels (e.g. oil cakes from rapeseed-based biofuel, or distillers grain from wheat-based biofuels), and grass (Woltjer 2011). Grass may be substituted by feed from crops, in the case of ruminants.  
===Livestock===
MAGNET distinguishes the livestock commodities of beef and other ruminant meats, dairy cattle (grass- and crop-fed), and a category ‘other animals’ (e.g. chickens and pigs) that is primarily crop-fed. The modelling of the livestock sector includes different feedstuffs, including feed crops, co-products from biofuels (e.g. oil cakes from rapeseed-based biofuel, or distillers grain from wheat-based biofuels), and grass (Woltjer 2011). Grass may be substituted by feed from crops, in the case of ruminants.  


===Land supply in MAGNET===: In MAGNET, land supply is calculated using a land supply curve that relates the area in use for agriculture to the price of land (Figure 4.1.1.c). Total land supply contains all the land that is potentially available for agriculture, i.e. where crop production is possible given soil and climatic conditions, and where no other restrictions apply (e.g. urban or protected area designations). In the IMAGE model, for every region, total land supply is obtained from potential crop productivity and land availability on a resolution of 5 by 5 arcminutes. Within this total potential, the land supply curve indicates the price at which additional land may be taken in use. The supply curve depends on total land supply, actual agricultural area, the actual land price, and the estimated actual price elasticity of land supply. Regions differ in the fraction of land already in use, and in the change in land prices related to changes in agricultural land use. In regions where most of the area suitable for agriculture is already in use, the price elasticity of land supply is small, with little expansion occurring at strong price changes. In contrast, in regions with a large reserve of suitable agricultural land, such as sub-Saharan Africa and some regions in South America, the price elasticity of land supply is large, i.e. strong expansion of agricultural land occurs at small price changes.
===Land supply in MAGNET===
In MAGNET, land supply is calculated using a land supply curve that relates the area in use for agriculture to the price of land (Figure 4.1.1.c). Total land supply contains all the land that is potentially available for agriculture, i.e. where crop production is possible given soil and climatic conditions, and where no other restrictions apply (e.g. urban or protected area designations). In the IMAGE model, for every region, total land supply is obtained from potential crop productivity and land availability on a resolution of 5 by 5 arcminutes. Within this total potential, the land supply curve indicates the price at which additional land may be taken in use. The supply curve depends on total land supply, actual agricultural area, the actual land price, and the estimated actual price elasticity of land supply. Regions differ in the fraction of land already in use, and in the change in land prices related to changes in agricultural land use. In regions where most of the area suitable for agriculture is already in use, the price elasticity of land supply is small, with little expansion occurring at strong price changes. In contrast, in regions with a large reserve of suitable agricultural land, such as sub-Saharan Africa and some regions in South America, the price elasticity of land supply is large, i.e. strong expansion of agricultural land occurs at small price changes.


===Reduced availability of land===: By restricting land supply in IMAGE and MAGNET, the models can assess scenarios with additional protected areas, or reduced emissions from deforestation and forest degradation (REDD).
===Reduced availability of land===
By restricting land supply in IMAGE and MAGNET, the models can assess scenarios with additional protected areas, or reduced emissions from deforestation and forest degradation (REDD).


===Intensification of crop and pasture production===: Crop and pasture yields in MAGNET may change as a result of the following four processes:
===Intensification of crop and pasture production===: Crop and pasture yields in MAGNET may change as a result of the following four processes:

Revision as of 17:04, 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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