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Two tariff aggregation extensions to global trade models are proposed, taking advantage of international trade data at the tariff line level. The proposed methods correct for typical biases in tariff aggregation. Firstly, they take into account the substitution effects in an optimal consumption bundle at the tariff line level. Secondly, they also deal with the “water” in tariffs, i.e. the imperfect transmission of tariff cuts to domestic prices. Finally, they model Tariff Rate Quotas explicitly. The aggregators are tested for Swiss tariff dismantling scenarios towards imported EU beef products, after implementing them in a partial equilibrium model of the agricultural sector.

Agricultural Economics, 48 (4), ISSN:0169-5150, ISSN:1574-0862

The cheese processing aid is used in Switzerland since 1999 to support cheese production and raw milk producer. This paper presents ex-post and ex-ante evaluations of reductions of this processing aid. The ex-post analysis, using vector autoregressive models and monthly milk prices, estimates the effects of reductions of the aid on milk prices for Emmentaler, Gruyère and industrial cheese production. Declines in the aid were found to have significant negative but heterogeneous effects on milk prices and that these reductions are transmitted only imperfectly. The ex-ante analysis evaluates the effects of a complete removal of the aid using a partial equilibrium model. Despite the contraction of cheese production, this was found to have a positive net global welfare impact due to the reallocation of raw milk to other milk channels.

Import tariffs are typically defined at a very detailed level, which is then used in trade negotiations. The WTO Framework Agreement of July 2004 proposes the use of a “tiered” formula where tariff lines classified in higher ‘bands’ are subject to proportionally higher cuts. Exceptions to the general rule, like sensitive products, are also defined at the tariff line level. Despite the relevance of tariff structure on trade liberalization, computable partial or general equilibrium models usually represent more aggregated products. In this respect, the literature suggests that market models can be combined with detailed tariff modules. We propose a new methodology to more accurately aggregate tariffs from the tariff line level to the one required by computable equilibrium models. The Tariff Reduction Impact Model for Agriculture (TRIMAG) uses the highest possible level of disaggregation (8 digits) and allows implementing tariff cuts and deriving the domestic price drops foreseen by alternative trade policy scenarios. Aggregated tariffs are derived by considering the substitutability effects in consumption between the tariff lines corresponding to the same aggregate product. We incorporate the tariff aggregates of TRIMAG resulting from a WTO agreement into the Common Agricultural Policy Regionalized Impact (CAPRI) partial equilibrium model. Differences between the standard tariff aggregation of CAPRI and the newly implemented methodology are illustrated. Results show that, when tariff cuts are applied at the 8 digit level, whether the substitution in consumption between tariff lines will result in a lower or higher aggregate tariff cut than the one that should directly be applied to the aggregate product is an empirical question. The selection of a limited number of sensitive tariff lines, if their share in the consumption bundle is high, might significantly raise the tariff for the corresponding aggregated product.

Food security, natural resources and climate change related questions focusing on a longer time horizon (2050+) are gaining importance. To assess the requirements and challenges entailed with the simulation of long-term issues in the agri-food sector the JRC-IPTS carried out the project “Methodological requirements of a modelling tool for simulation of long-term (2050) effects of policies affecting the agricultural and food sectors”, involving experts for different methodologies. Partial and General Equilibrium models are covered as well as Dynamic Stochastic General Equilibrium (DSGE) and Optimal Control Theory (OCT) approaches are taken into account, evaluated and discussed.[résumé des auteurs]

This paper computes and analyses total factor productivity (TFP) growth rates for tropical agricultural systems in Central-Western Africa and South-East Asia. Two regions that despite sharing common agro-ecological conditions, have pursued different adoption rates of green revolution technology and have reported dissimilar yields per hectare. A panel data set is constructed for the period 1987-2007 from the FAOSTAT database. A Bayesian stochastic frontier model with country specific temporal variation in technical efficiency is estimated. Technical efficiency estimates reveal that there is substantial room for improvement in both continental sub-sets and that TFP estimates show on average larger rates of growth for South-East Asian countries as compared to Central-Western African countries. Results indicate that TFP is mostly driven by technical change and countries such as Benin, and Gambia display catch-up.

This paper computes and analyses total factor productivity (TFP) growth rates for tropical agricultural systems in Central-Western Africa and South-East Asia. Two regions that despite sharing common agro-ecological conditions, have pursued different adoption rates of green revolution technology and have reported dissimilar yields per hectare. A panel data set is constructed for the period 1987-2007 from the FAOSTAT database. A Bayesian stochastic frontier model with country specific temporal variation in technical efficiency is estimated. Technical efficiency estimates reveal that there is substantial room for improvement in both continental sub-sets and that TFP estimates show on average larger rates of growth for South-East Asian countries as compared to Central-Western African countries. Results indicate that TFP is mostly driven by technical change and countries such as Benin, and Gambia display catch-up. Keywords: Bayesian Inference, Stochastic Production Frontier, Time Varying Technical Inefficiency, Total Factor Productivity Growth, Tropical Agricultural Systems JEL Classification: C15, D24, O47, JRC.J.4-Agriculture and Life Sciences in the Economy

The Renewable Energy Directive (2009/28/EC) requires that 20% of the EU's energy needs should come from renewable sources by 2020, and includes a target for the transport sector of 10% from biofuels. This report analyses and discusses the global impacts of this biofuel target on agricultural production, markets and land use, as simulated by three agricultural sector models, AGLINK-COSIMO, ESIM and CAPRI. The impacts identified include higher EU production of ethanol and biodiesel, and of the crops used to produce them, as well as more imports of both biofuels. Trade flows of biofuel feedstocks also change to reflect greater EU demand, including a significant increase in vegetable oil imports. However, as the extra demand is small in world market terms, the impact on world market prices is limited. With the EU biofuel target, global use of land for crop cultivation is higher by 5.2 million hectares. About one quarter is area within the EU, some of which would otherwise have left agriculture., JRC.DDG.J.5-Agriculture and Life Sciences in the Economy

Various scenarios for an expiry of European Union milk quotas are analysed with the Common Agricultural Policy SIMulation (CAPSIM) model. This comparative-static, partial equilibrium modelling tool covering the whole of agriculture for all EU member states has been disaggregated to represent nine secondary dairy products. Impacts are compared to a reference run where the 2003 Common Agricultural Policy Reform is projected into the future. The main milk quota expiry scenario is for 2020. Key results are that milk production would increase by 3.0% in EU-27 whereas milk prices would drop by 7.2%. The resulting decline in butter prices is shown to be larger if EU authorities cannot rely on export subsidies for market management. The regional pattern of impacts is strongly determined by the specification of quota rents. Furthermore, details of intra EU price transmission are shown to influence the differences between Member States. An applied welfare analysis of the main expiry scenario gives a significant redistribution from EU-27 farmers and much less from taxpayers to dairies and final consumers. The estimated small positive overall welfare gain would increase in a situation without export subsidies. Verschiedene Szenarien zur Abschaffung der EU-Milchquoten wurden mit dem 'Common Agricultural Policy SIMulation' (CAPSIM) Modell untersucht. Dieses komparativ-statische partielle Gleichgewichtsmodell wurde im Milchsektor erheblich disaggregiert (neun Verarbeitungsprodukte). Der Referenzlauf beinhaltet eine Beibehaltung der derzeitigen Ausgestaltung der EU-Agrarpolitik bis zum Jahr 2020. Im Hauptszenario eines Auslaufens der Quotenregelung in 2015 ergibt sich in der EU-27 eine Produktionsausdehnung von 3.0% und ein durchschnittlicher Verfall der Rohmilchpreise um 7.2%. Der resultierende Preisrückgang bei Butter ist abhängig davon, ob Exporterstattungen zur Abfederung des Preisdrucks eingesetzt werden. Die Ergebnisse werden stark von der Spezifikation der Quotenrenten geprägt, während das Bild auf Mitgliedsländerebene auch von der Intra-EU-Preistransmission beeinflusst wird. Im Hauptszenario mit Exporterstattungen kommt es zu einer deutlichen Umverteilung von der Landwirtschaft und, weitaus weniger gewichtig, von Steuerzahlern zur Molkereiwirtschaft und Endverbrauchern. Der resultierende Wohlfahrtsgewinn ist klein, würde aber ansteigen, wenn die Quoten in einer Situation ohne Exporterstattungen auslaufen würden.

The aim of this study is to provide and describe a multicommodity analysis able to focus and investigate two EU relevant agricultural policy aspects: the dairy reform and the enlargement to Western Balkan countries. The analysis is carried out using the Common Agricultural Policy SIMulation (CAPSIM) model developed in the early 1980s by EuroCARE and the University of Bonn on behalf of DG ESTAT. The model is further upgraded for this study in order to analyse the effects of the Health Check decisions on the EU dairy market as well as the impact of the EU enlargement towards Western Balkans countries. Key results of the main quota expiry scenario for 2020 are that milk production would increase by 3.1% in the EU-27 whereas milk prices would drop by 7.3%. Accession effects in the Western Balkan countries would originate in some convergence to EU prices, in technology transfer which would increase yields, and in CAP components introduced on the Western Balkan like milk quotas or decoupled payments., JRC.J.5-Agriculture and Life Sciences in the Economy

This report is based on the outcome of a study carried out by the European Commission's Joint Research Centre - Institute for Prospective Technological Studies (JRC-IPTS, Spain) in cooperation with EuroCARE (Bonn, Germany) and the collaboration of the Agricultural Economics Research Institute (LEI, the Netherlands) and the Catholic University of the Sacred Heart (Unicatt, Italy). The report provides a review the most recent studies modelling the European milk quota. The focus is on milk quota rents, which are a central element in carrying out impact analyses on dairy policies. Direct approaches to estimating milk quota rents are the only option for providing empirically gained estimates to be used in equilibrium models. From the reviewed empirical estimates, it appears that differences in magnitude and rankings are present across the considered studies. This poses serious problems when these estimates are used for calibration, because equilibrium models are highly sensitive to the assumptions made on quota rents. Another difficulty lies in the choice of the length of run used when calibrating. As previously mentioned, equilibrium models are sensitive to the assumptions made on quota rents and different lengths of run may lead to different policy conclusions. Given that the micro-econometric estimation of milk quota rents seems to be an ongoing issue and its translation for equilibrium models far from being settled, it is advisable to perform sensitivity analysis using, whenever possible, different sets of estimates in order to assess the robustness of policy analysis., JRC.J.5-Agriculture and Life Sciences in the Economy

This report is based on the outcome of a study carried out by the European Commission's Joint Research Centre - Institute for Prospective Technological Studies (JRC-IPTS, Spain) in cooperation with EuroCARE (Bonn, Germany) and the collaboration of the Agricultural Economics Research Institute (LEI, the Netherlands) and the Catholic University of the Sacred Heart (Unicatt, Italy). The report provides an economic impact assessment of possible implications of the Health Check of the Common Agricultural Policy (CAP), with an explicit focus on regional effects of a milk quota abolition in the EU-27 in the year 2015. For the analysis the CAPRI model was updated with econometric estimates of milk quota rents at regional level and simulation results are presented for the year 2020. The detailed spatial resolution allows identifying regions where economic changes are larger than visible from aggregated impacts at Member State or European level., JRC.J.5-Agriculture and Life Sciences in the Economy

The aim of this paper is to gain better insights in the implications of some of the most important economic assumptions and empirical choices made in partial equilibrium models focusing on dairy. Three partial equilibrium models are considered: the AGricultural Member states MODeling (AGMEMOD) model, the Common Agricultural Policy SIMulation (CAPSIM) model, and the European Dairy Industry Model (EDIM). This paper analyses how quota rent and supply elasticity estimates, as they are used in these models affect milk output and price projections. Sensitivity analysis is also considered in order to take into account uncertainty in quota rent and supply elasticity estimates. Taking into account the considered uncertainty our best estimate is in case of abolishing the quota the EU’s aggregate milk production will expand, with the increase being somewhere in the range between 5 and 15%. Das Ziel dieses Beitrags ist es, am Beispiel des Milchmarkts die Auswirkungen wichtiger ökonomischer Annahmen in partiellen Gleichgewichtsmodellen zu untersuchen. Wir beziehen drei Modelle in die Analyse ein: das Agricultural Member states MODeling (AGMEMOD)-Modell, das Common Agricultural Policy SIMulation (CAPSIM)-Modell sowie das European Dairy Industry Model (EDIM). Untersucht wird der Einfluss von Annahmen über die Quotenrenten und die Angebotselastizitäten, wie sie in diesen Modellen zwecks Projektion der Milchmenge und des Milchpreises getroffen werden. Der Unsicherheit bei der Schätzung von Quotenrenten und Angebotselastizität wird durch Sensititätsanalysen Rechnung getragen. Unter Berücksichtigung der bestehenden Unsicherheit lautet die beste Schätzung für den Fall der Abschaffung der Milchquote, dass die Milcherzeugung in der EU in einem Umfang von 5 bis 15 % ausgedehnt werden wird.

In the so-called Common Agricultural Policy (CAP) 'Health Check' the European Commission has recently proposed gradual transitional measures to allow a 'soft landing' of the milk sector to quota expiry. The aim of this paper is to support policy makers to get better insights in the implications of some of the most important economic assumptions and empirical choices made in partial equilibrium models focusing on dairy. Three partial equilibrium models are considered: the Agricultural Member states MODeling (AGMEMOD) model, the Common Agricultural Policy SIMulation (CAPSIM) model, and the European Dairy Industry Model (EDIM). The paper analyzes how the most important economic supply components, as they are part of the three key dairy models, affect milk production projections. A main conclusion is that the evaluation of the contribution of a study should not be based on one single characteristic (such as quota rents, supply responses). One isolated characteristic is not able to explain finally obtained model outcomes. Quota rents, supply responses, shifters and the demand side have to be integrated with each other.

This paper sets out to analyse the impact of milk quotas had on the dairy farm structure of the Netherlands. In addition projections on the likely farm structure under different milk quota scenarios are explored. Moreover mobility indicators characterizing structural change are developed and calculated. A Markov probability model is estimated relying on a generalized cross entropy approach. The introduction of milk quotas as of April 1, 1984 froze the dairy farm structural adjustment, at least initially. However, later on mobility started to increase, which is likely to reflect the quota tradability and lease possibilities. Moreover there is evidence that the milk quota regime has increased concentration of dairy production among farms with 50-69 cows. If after quota abolition the dairy farm structural dynamics would be the same as in the 1972-83 period, then quota abolition in 2015 will lead to a substantial increase in the number of farms in 2022 as compared to the current status quo.

The aim of the present technical report is to describe the underlying techniques and methods developed for data selection and data preparation for the Common Agricultural Policy SIMulation (CAPSIM) model. CAPSIM was developed in the early 1980s by EuroCARE and the University of Bonn on behalf of DG ESTAT. In 2006, the CAPSIM model was transferred from DG ESTAT to the European Commission's Joint Research Centre, Institute for Prospective Technological Studies (JRC-IPTS) in order to extend the model to new Candidate Countries to the European Union accession and to further develop the modelling tools for CAP analysis. In terms of country coverage the database covers: EU-27, Croatia, Former Yugoslav Republic of Macedonia, as well as other Western Balkan countries, and Turkey. In terms of items and products the database is set up in a more disaggregated form in order to extend the dairy commodities coverage in view of the ongoing Common Agricultural Policy reform. The modelling database is implemented in a routine called "Complete and Consistent Database" (COCO) to establish database' completeness and consistency based on the various type of official data. The routine consists in two steps: inclusion and combination of input data and calculation of complete and consistent data., JRC.J.5-Agriculture and Life Sciences in the Economy

The study provides an agricultural multi commodity analysis able to focus and investigate the ongoing EU milk reform. The analysis is carried with the Common Agricultural Policy SIMulation (CAPSIM) model which is a comparative-static, partial equilibrium modelling tool covering the whole of agriculture of EU member states. The model provides a reference run which is a "baseline scenario" where the 2003 CAP Reform is projected into the future. This scenario is compared to a "quota expiry" scenario where milk quotas are abolished by 2015, a "soft landing" scenario where further quota expansions are envisaged and an "early quota expiry" by 2009. Sensitivity analysis is done for different set of quota rent assumptions and export refund abolition. Key results, under a "quota expiry scenario" are that milk production would increase by 2.8% in EU27 whereas milk prices would drop by 7.5%.

Over fifteen years have elapsed since the transition from the centrally planned economic system started in the early 1990’s. During this time agricultural and rural areas of Central and Eastern Europe have undergone profound structural changes with wide variations in the degree of transformation and in the rate of success in creating a competitive market and private ownership based food and agricultural system. By becoming member of the European Union the "transition" in its traditional interpretation has been concluded in ten of the Central East European countries. The transition to market based agriculture, however, is far from completion in Southern and Eastern Europe and especially in the CIS countries. International Association of Agricultural Economists (IAAE) and European Association of Agricultural Economists (EAAE) in collaboration with the Corvinus University of Budapest and with a number of other institutions in Hungary organized an inter-conference seminar on the subject of agricultural transition in Central and Eastern Europe and Central Asia. The major objective of the seminar was to discuss and draw conclusions on the role of agricultural policy in the transition process in the light of actual progress and current situation in Central and East European countries and in formal Soviet States. In addition the contribution of agricultural economics – both from the West and from the East – as a discipline and a profession to the transition process in agriculture were discussed. A specific objective was to identify priorities and means to strengthen the agricultural economics profession in the transition countries and determine research and educational priorities for the future. The seminar was attended by 118 participants representing 26 countries from Europe, North America and Asia. The Seminar was the largest professional meeting organized by the two associations in 2007. Over 110 abstracts were submitted and evaluated by the International Program Committee. In the two day program of the meeting, 8 presentations were made during the 3 plenary sessions, 66 papers were presented in the 15 contributed paper sessions in 8 subject categories. In addition there were 15 posters discussed in the poster session and the findings of a World Bank study on distortions of agricultural incentives in the region was the subject of a pre-conference workshop. Plenary speakers included Ulrich Koester, Johan Swinnen, Jerzy Wilkin, Zvi Lerman, Eugenia Serova and József Popp-Gábor Udovecz. At the end of the seminar David Colman, President of IAAE gave a global assessment of the status of agricultural economics discipline and profession, while Csaba Csáki, former President of IAAE made summary comments on major issues discussed during the seminar. This volume includes the plenary and contributed papers presented at the seminar and submitted for publications by the authors as well as the abstracts of the poster papers discussed. The seminar was supported and sponsored by a number of organizations and persons. All of their contributions have to be greatly acknowledged. First the two international organizations IAAE and EAAE have to be mentioned, which provided overall organizational framework and logistical support. The IAAE provided in addition a generous grant to support the participation of young agricultural economists from Central and Eastern Europe on the seminar. On the Hungarian side the Corvinus University of Budapest, the Szent István University of Gödöllő, the Research Institute for Agricultural Economics, the Hungarian Agricultural Economics Association, the Hungarian Association of Agricultural Sciences and the Hungarian Ministry of Agriculture and Rural Development were the major material and organizational supporters. The International Program committee was chaired by David Colman and Csaba Csáki and included Ulrich Koester, Joe Swinnen, Eugenia Serova and Jerzy Wilkin. The local Organizing committee was chaired by Csaba Forgács and István Szűcs and included Zoltán Lakner, András Nábrádi, József Popp, József Tóth, Gábor Udovecz, László Vajda, László Villányi, Krisztina Fodor, Attila Jámbor and Tamás Mizik. Finally IAMO, Halle facilitated the publication of this proceedings.

The aim of this paper is to analyse the evolution of the dairy farm structure of Poland during the post-socialist period. First the paper focuses on how the farm structure has changed over time and what path it is likely to follow in the coming decade. Second, it is tested whether the evolution of farm size is explained by non-stationary effects. Finally, several statistical indicators are computed on farm mobility and on which farms are likely to survive. An instrumental variable generalised cross entropy Markov chain approach which incorporates prior information is applied for estimation. Prior information included general and plausible information on farm mobility and structural adjustments based on independent literature. The projections show that dairy farm numbers will continue to decline, although accompanied by an increase in the number of medium-sized and large farms. Subsistence dairy farms are expected to slowly leave the sector in the coming decade.

In this paper an output distance function framework is exploited to analyse the agricultural Polish technology and output mix adjustments due to transition. In order to overcome the limited available data the output distance function is estimated by Generalized Maximum Entropy (GME) for the 1991-2001 time period. Besides the sample data, the estimation procedure exploits prior information e.g. several regularity conditions and a ‘weak revenue maximization’ assumption. We find that after transition the implicit share of milk and beef and veal output declines over time whereas cereals output and potatoes and rapeseeds and sugar beets output increases. Our estimates suggest a clear complementarity relationship between chicken and pig meats output and cereals output. The EU accession resulted in a relative increase of cow milk/beef and veal meats output over chicken and pig meats output, and in a relative increase of cereals output over potatoes, rapeseeds and sugar beets output.

The EU dairy sector is facing a period of significant changes that are due to three major decisions: the EU enlargement, the Luxembourg reform and on-going WTO negotiations. To evaluate the impact of such changes we developed a model of the EU and world dairy industry. The model is composed of two modules that interact: a milk and beef supply module and a dairy industry module. In this paper we present the model and focus on elements that are crucial for a better understanding of the impact of reforms: quota rents in the EU, evolution of production in the new member states and trade policy.

The Common Agricultural Policy SIMulation (CAPSIM) model is one of the European Commission in-house models used for impact analysis of the Common Agricultural Policy (CAP). It is a calibrated, comparative static, partial equilibrium model which was developed in the early 1980s by EuroCARE and the University of Bonn on behalf of DG ESTAT for agricultural policy analysis. In 2006, CAPSIM was transferred from DG ESTAT to JRC-IPTS. The CAPSIM model has a rather disaggregated coverage of items and individual European Union Member States and Candidate Countries. The present IPTS Technical Report describes the model structure of CAPSIM in its version from 2005 with several applications. The first part of the report focuses on explaining the model specification, particularly: supply and demand side, processing, labour, different policy regimes as applied in the CAP, trade regimes and welfare calculations. The second part describes the CAPSIM software in order to provide a guided tour through the technical aspects of the model for potential users., JRC.J.5-Agriculture and Life Sciences in the Economy