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To trade or not to trade: non-separable farm household models in partial and general equilibrium

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  • Lofgren, Hans
  • Robinson, Sherman

Abstract

Empirical evidence and microeconomic theory suggest that, in many settings, farm household production and consumption decisions are "non-separable." Non-separability may have important policy implications, including lack of response or threshold effects when incentives change. This paper extends the literature in two ways. First, we develop a non-separable farm household model with transaction costs and endogenous choice of market "regime" (surplus, self-sufficiency, or deficit) for production-consumption items (commodities and factors that are both demanded and supplied by the household). Second, we embed this household model in an economywidecomputable general equilibrium model which is formulated as a mixed-complementarity problem. Simulations with a model based on data for a stylized, low-income, Sub-Saharan African country show that the proposed formulation enhances our ability to analyze the impact of exogenous changes on African farmers.

Suggested Citation

  • Lofgren, Hans & Robinson, Sherman, 1999. "To trade or not to trade: non-separable farm household models in partial and general equilibrium," TMD discussion papers 37, International Food Policy Research Institute (IFPRI).
    • Handle: RePEc:fpr:tmddps:37
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    References listed on IDEAS

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    5. Lofgren, Hans & Robinson, Sherman, 1997. "The mixed-complementary approach to specifying agricultural supply in computable general equilibrium models:," TMD discussion papers 20, International Food Policy Research Institute (IFPRI).
    6. Lopez, Ramon E., 1984. "Estimating labor supply and production decisions of self-employed farm producers," European Economic Review, Elsevier, vol. 24(1), pages 61-82.
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    2. McCulloch, Neil, 2003. "The impact of structural reforms on poverty : a simple methodology with extensions," Policy Research Working Paper Series 3124, The World Bank.
    3. Aragie, Emerta A. & McDonald, Scott, 2023. "The economic consequences of price support policies in semi-subsistence economies," Journal of Policy Modeling, Elsevier, vol. 45(6), pages 1148-1166.
    4. Mduma, John K. & Wobst, Peter, 2005. "Village Level Labor Market Development in Tanzania: Evidence from Spatial Econometrics," Discussion Papers 276260, University of Bonn, Center for Development Research (ZEF).
    5. Jann Lay, 2010. "Sequential macro-micro modelling with behavioural microsimulations," International Journal of Microsimulation, International Microsimulation Association, vol. 3(1), pages 24-34.
    6. Findeis, Jill L. & Swaminathan, Hema & Jayaraman, Anuja, 2003. "Agricultural Household-Firm Units: Adjustments to Change," Policy Reform and Adjustment Workshop, October 23-25, 2003, Imperial College London, Wye Campus 15738, International Agricultural Policy Reform and Adjustment Project (IAPRAP).
    7. Brooks, Jonathan & Melyukhina, Olga, 2003. "The Effects of Agricultural Policy Reform on Poverty in Brazil," Policy Reform and Adjustment Workshop, October 23-25, 2003, Imperial College London, Wye Campus 15752, International Agricultural Policy Reform and Adjustment Project (IAPRAP).
    8. Minot, Nicholas, 1999. "Effects of transaction costs on supply response and marketed surplus," MTID discussion papers 36, International Food Policy Research Institute (IFPRI).
    9. Latruffe, Laure & Davidova, Sophia & Desjeux, Yann, 2008. "Perpetuation of subsistence farming in Western Balkans: the role of factor market imperfections," 82nd Annual Conference, March 31 - April 2, 2008, Royal Agricultural College, Cirencester, UK 36860, Agricultural Economics Society.

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