Agriculture Reference
In-Depth Information
our estimate of 1.63. These two effects lead to an underestimation of
the growth n demand for processed food and lvestock products as
well as a correspondng underestmaton of growth n the consumpton
of their principal intermediate inputs, namely cereals, soybeans, fruits
and vegetables. The result is an overestimation of future self-sufficiency
ratios and, thus, an underestimation of the cost of raising these to unity
va protecton.
Notes
1 A detailed description of the original model is provided by Hertel (1997).
2 The nominal side of the model is not used in this analysis, which focuses on long-run
changes. No nomnal rgdtes are ntroduced and so money neutralty prevals.
3 Our projection employs a similar approach to that used by Ianchovichina and Martin
(2002).
4
Prvate savng s derved as the dfference between dsposable ncome (Y-T) and
consumpton expendture, where real consumption is determined in a Keynesian reduced
form equaton that takes the form
γ= −
, where
r
s the real nterest rate.
5 Note that there s no allowance for nterregonal captal ownershp n the startng
equilibrium. At the outset, therefore, there are no factor service flows and the current
account s the same as the balance of trade.
6 By whch t s meant that households can drect ther savngs to any regon n the world
without impediment. Installed physical capital, however, remains immobile even between
sectors.
7 rje is the expected rental rate on physical capital, adjusted for depreciation and divided
by the prce of captal goods to yeld a untless net rate of return.
8 Before adding to the global pool, savings in each region is deflated using the regional
captal goods prce ndex and then converted nto US$ at the ntal exchange rate. The
global nvestment allocaton process then s made n real volume terms.
9 This investment relation is similar to Tobin's Q in the sense that the numerator depends
on expected future returns and the denomnator ndcates the current cost of captal
replacement.
10 The money and asset markets represented by Yang and Tyers (2000) play no role here,
as money s neutral and we report only real quanttes or relatve prces.
11 The long-run elastcty set used s the same as that employed by Tyers and Yang
(2000).
12 When tariff rates are raised to achieve food self-sufficiency, this implies that government
revenue ncreases faster than government spendng and there s a small fscal
C
r Y
δ µ
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