Staff Publications

Staff Publications

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    'Staff publications' is the digital repository of Wageningen University & Research

    'Staff publications' contains references to publications authored by Wageningen University staff from 1976 onward.

    Publications authored by the staff of the Research Institutes are available from 1995 onwards.

    Full text documents are added when available. The database is updated daily and currently holds about 240,000 items, of which 72,000 in open access.

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    A New Methodology for Incorporating Nutrition Indicators in Economy-Wide Scenario Analyses
    Rutten, M.M. ; Tabeau, A.A. ; Godeschalk, F.E. - \ 2013
    The Hague : FOODSECURE project office LEI Wageningen UR (FOODSECURE technical paper 1) - 30
    basisproducten - landbouwproducten - voedingsmiddelen - indicatoren - huishoudelijke consumptie - voedingsstoffen - evenwichtstheorie - commodities - agricultural products - foods - indicators - household consumption - nutrients - equilibrium theory
    This paper develops an innovative approach for calculating household nutrition indicators in a Computable General Equilibrium framework, using the flow of primary agri-food commodities through the global economy from farm to fork. It has been incorporated as a nutrition module in MAGNET. The method of tracing nutrients through the food system allows for making agriculture, the food supply chain and the economy as a whole nutrition-sensitive in scenario analyses. The validation of the nutrition outcomes in the base year with global data on nutrient consumption from the FAO reveals important differences which stem from differences in data and assumptions. Various solutions are identified to improve the calculations in the future. In the short run, correction factors are applied in the calculation of indicators in the nutrition module to capture and adjust the methodology for the remaining differences.
    Methods for computing Nash equilibria of a location quantity game, Submitted to Operations Research
    Sáiz Pérez, M.E. ; Hendrix, E.M.T. - \ 2006
    Wageningen : Mansholt Graduate School (Working paper / Mansholt Graduate School : Discussion paper ) - 26
    operationeel onderzoek - firma's - besluitvorming - optimalisatie - algoritmen - locatietheorie - markten - kosten - evenwicht - evenwichtstheorie - operations research - firms - decision making - optimization - algorithms - location theory - markets - costs - equilibrium - equilibrium theory
    A two stage model is described where firms take decisions on where to locate their facility and on how much to supply to which market. In such models in literature, typically the market price reacts linearly on supply. Often two competing suppliers are assumed or several that are homogeneous, i.e. their cost structure is assumed to be identical. The focus of this paper is on developing methods to compute equilibria of the model where more than two suppliers are competing that each have their own cost structure, i.e. they are heterogeneous. Analytical results are presented with respect to optimality conditions for the Nash equilibria in the two stages. Based on these analytical results, algorithms are developed to find equilibria. Numerical cases are used to illustrate the results and the viability of the algorithms. The method finds an improvement of a result reported in literature.
    Environmental-Economic Modelling of Novel Protein Foods: A General Equilibrium Approach
    Xueqin Zhu, Xueqin - \ 2004
    Wageningen University. Promotor(en): Ekko van Ierland. - Wageningen : S.n. - ISBN 9789085041313 - 243
    economie - milieu - evenwichtstheorie - modellen - milieubeleid - milieueffect - voedselketens - consumptie - eiwitrijke voedingsmiddelen - varkensvlees - nederland - vee - dierlijke producten - levenscyclusanalyse - mestoverschotten - economics - environment - equilibrium theory - models - environmental policy - environmental impact - food chains - consumption - protein foods - pigmeat - netherlands - livestock - animal products - life cycle assessment - manure surpluses
    Keywords: General equilibrium modelling, Welfare programs, Non-convexities, Novel Protein Foods, Environmental life cycle assessment.

    Intensive animal production systems inEurope, particularly in theNetherlands, result in a series of environmental problems mainly due to manure surplus. This thesis aims to make contributions to identifying solutions to the problems related to protein production and consumption.

    The first contribution concerns the theoretical modelling of environmental problems. This includes how to represent environmental impacts in economic models considering the interactions between the economic system and the environmental system, and how to deal with the relevant non-convexities.We represent the environmental impacts theoretically by including the biophysical processes of environmental changes and feedbacks to the economy in welfareoptimisationand equilibrium models. This often brings non-convexities to the model, and thushas implications for policy recommendations, because a non-convex program usually has multiple local optima and has the difficulty of decentralisation. Particularly we illustrate how to solve a non-convex program using parameterisation for the interaction between pork and crop production and how to check decentralisability of the welfare optimum.

    The second contribution is a systematic analysis of protein chains, which provides information on their environmental pressures. We use the environmental life cycle assessment (LCA) to compare the environmental pressures of a Dutch pork chain and a pea-based chain for Novel Protein Foods (NPFs). We concluded that NPFs are environmentally more friendly than pork based on per unit of protein consumption in terms of environmental pressure indicators.

    The third contribution is the empirical application of Applied General Equilibrium (AGE) models to analyse the economic and environmental impacts of enhanced consumption of NPFs under different scenarios in a global context. Our model results show that an exogenous shift from animal protein foods to NPFs in the EU, which is represented by an increased expenditure share of NPFs in protein budget, will decrease the global NH 3 emissions. If EU consumers are willing to pay to improve air quality, the EU will reduce the pork production and increase pea production. If 'rich' consumers consume more NPFs through lifestyle change in meat consumption, the global emissions of NH 3 , N 2 O and CH 4 will be reduced.

    Municipal solid waste management problems: an applied general equilibrium analysis
    Bartelings, H. - \ 2003
    Wageningen University. Promotor(en): Ekko van Ierland, co-promotor(en): R.B. Dellink. - [S.l.] : S.n. - ISBN 9789058089250 - 243
    milieu - economie - milieubeleid - evenwichtstheorie - afvalbeheer - afvalverwijdering - nederland - environment - economics - environmental policy - equilibrium theory - waste management - waste disposal - netherlands
    Keywords: Environmental policy; General equilibrium modeling; Negishi format; Waste management policies; Market distortions.

    About 40% of the entire budget spent on environmental problems in theNetherlandsis reserved for the waste management problem. Regardless of the amount spent on waste management, the quantity of municipal solid waste generated still increases. It has up till now proven impossible to decouple generation of municipal solid waste and income growth.

    This thesis investigates the policy options that can be used to reduce generation of municipal solid waste and looks specifically at the direct and indirect effects of introducing unit-based pricing. Two types of unit-based pricing are distinguished: a full unit-based pricing scheme, in which municipalities charge a variable price for collection of both organic waste and rest waste, and a selective unit-based pricing scheme, in which municipalities only charge a unit-based price for the collection of rest waste. It presents a modeling framework to simulate the waste market in theNetherlands. The model includes several municipalities as sources of waste, consumer preferences, economies of scale, transport costs, and several kinds of emissions caused by waste treatment. In this thesis specific focus was given to the possibility of waste leakage, where consumers pollute the organic waste stream with rest waste.

    The model was used in a stylized example with numerical data based on the Netherlands in 2000. The results show that the selective unit-based pricing scheme is the most effective policy tool to reduce generation of municipal solid waste. Due to the effects of waste leakage, however, it is not advisable to introduce unit-based pricing in every municipality. The results show that it is not cost effective to introduce selective unit-based pricing for waste collection in larger municipalities. In these municipalities the effects of waste leakage are too costly. The degree of pollution is so high that part of the organic waste stream cannot be composted and will have to be incinerated, thus greatly increasing the costs of treating organic waste. Only in small municipalities with a relatively large number of environmentally concerned consumers selective unit-based pricing can be introduced. Larger municipalities may consider introducing full unit-based pricing. This policy tool, however, only stimulates prevention and not recycling, thus the effects for reducing generation of rest waste are limited.

    Cereal Trade in Developing Countries: A Stochastic Equilibrium Analysis of Market Liberalisation and Institutional Changes in Burkina Faso
    Ruijs, A.J.W. - \ 2002
    Labyrint Publication : Capelle a/d IJssel - ISBN 9789053350010 - 310
    marketing van voedingsmiddelen - simulatiemodellen - graansoorten - markten - handel - boeren - aanbod - vraag - evenwichtstheorie - plattelandsontwikkeling - transport - opslag - prijzen - burkina faso - west-afrika - food marketing - simulation models - cereals - markets - trade - farmers - supply - demand - equilibrium theory - rural development - transport - storage - prices - burkina faso - west africa
    Agriculture and the environment: applied general equilibrium policy analyses for the Netherlands
    Komen, M.H.C. - \ 2000
    Agricultural University. Promotor(en): A.J. Oskam; J.H.M. Peerlings. - S.l. : S.n. - ISBN 9789058082824 - 198
    landbouw - milieu - landbouwbeleid - milieubeleid - evenwichtstheorie - nederland - econometrische modellen - economische analyse - agriculture - environment - agricultural policy - environmental policy - equilibrium theory - econometric models - economic analysis - netherlands

    There is a growing awareness of actual and potential threats to the natural environment in the form of the exhaustion of natural resources, the pollution of air, land and water resources, and the deterioration of bio-diversity. As in most industrialised countries, the concern for maintaining or improving environmental quality has taken a firm place on the policy agenda in the Netherlands. Hence, for policy makers and interest groups, it is important to understand the nature of different environmental problems, the linkages between the economy and the environment, and the economic and environmental consequences of government intervention.

    The Dutch economy, agriculture and environment are highly interrelated. Agriculture, industries that are directly related to agriculture (agribusiness) and international trade in agricultural and food products form a substantial part of Dutch economic activity. Moreover, agricultural production causes a number of specific environmental problems, primarily related to the use of industrial inputs like fertiliser and pesticides. In addition, agriculture also contributes to some general environmental problems like the greenhouse effect, acidification and eutrophication.

    Three relevant categories of policies can be distinguished that stress the changing policy environment of agriculture and the linkages that exist between the economy, the environment and agriculture:

    1. environmental policies that are specific for agriculture;
    2. general environmental policies that affect agriculture; and
    3. agricultural policies that entail environmental effects.

    In addition, the importance of environmental policies relatively to other policies in agriculture is increasing. Hence, there is scope for empirical analysis of Dutch agriculture and agribusiness, in order to unravel the qualitative and quantitative relation between the environment and economic activity.

    The purpose of this thesis is to quantify the economy-wide environmental and economic effects of agricultural and environmental policies and the interactions between these policies, in the Netherlands. Some of the most important policy issues are dealt with in this thesis. Policy simulations are:

    1. the manure policy;
    2. the introduction of a small-user energy tax;
    3. the reduction of emissions contributing to the environmental indicators eutrophication, the greenhouse effect, acidification and waste accumulation; and
    4. the increase of milk quota under a nitrogen emission restriction.
      1. The basic tool used in this thesis is a static, single-country applied general equilibrium (AGE) model for the Dutch economy, in which environmental relations are incorporated explicitly. Given the linkages described and the economy-wide and trade effects that can be expected from agricultural and environmental policies, using an AGE for a small open economy is appropriate. Moreover, the availability of new environmental data at a very disaggregated level for the Netherlands makes it possible, and from a scientific point of view interesting, to link environmental data to economic activity in an AGE model. Finally, an AGE model provides useful information on several variables that are relevant for policy makers and interest groups.

        Chapter 2 presents and discusses the AGE model and data used. Since in the different policy simulations different modifications of the model are used, the description of the model is not exhaustive. Modifications of the model, used in the different policy simulations, are dealt with in the concerning chapters. A complete description of the basic model is presented in appendices. The chapter also deals with the economic and environmental data used. Data obtained from own calculations (e.g., detailed environmental data and disaggregation of agricultural data) are summarised in appendices.

        In Chapter 3, the effects on the Dutch economy of a reduction in intensive livestock production are analysed. Such a reduction is a possible solution to environmental problems linked with the excess supply of minerals to the environment. A decrease in intensive livestock production to achieve a phosphate loss of 30 kg/ha (policy goal in 2002) will decrease income from pig and poultry farming by 2.6 and 1.0 per cent, respectively. If pig production alone is reduced, the income from pig farming will decrease by 4.8 per cent. The lower production in pig and poultry farming affects the production and income of the compound feed, pig and poultry meat industries more seriously than the livestock industries because of the absence of quota rents as part of income. The effects on trade are that net exports of livestock and net imports of feedstuffs decrease. Moreover, in all cases, the exchange rate appreciates, which indicates that the trade position of the Netherlands would deteriorate because of the livestock reduction. In the case of a permitted phosphate loss of 30 kg/ha when only pig production is reduced, welfare decreases by 800 mln 1990 guilders which is only 0.15 per cent of national income. This welfare reduction would be offset by environmental improvements that are not included in the welfare measure.

        The simulations give a good insight into the economic effects of a stricter mineral policy. It clearly shows that the introduction of an environmental policy that is specific for agriculture entails economy wide effects, revealing the linkages that exist between agriculture and the rest of the economy. The results form the background to discussions on the advantages and disadvantages of reducing Dutch livestock production and on the design of policies in other countries that deal with the same environmental problems. An important policy implication is the fact that industries related to the livestock industries (compound feed, pig and poultry meat industries) are affected more seriously than the livestock industries. This result is mainly due to the compensating effect of the quota rents for current farmers. However, the value of this quota (production rights) forms an entry barrier and has a negative effect on the structure of intensive livestock farming.

        Chapter 4 deals with a general environmental policy that also has consequences for individual agricultural industries. In 1996, the Dutch government implemented an energy tax on fossil fuels for heating and electricity by households and 'small' energy users (small-user energy tax). The revenues of the energy tax are used to lower the pre-existing distortionary taxes related to labour. The research in this chapter shows the detailed environmental and economic effects of this Dutch unilateral environmental tax reform. Special attention is paid to the double-dividend argument that the introduction of a small environmental tax reform not only improves the environment (first dividend) but might also raise non-environmental welfare, due to an improvement in the efficiency of the tax structure (second dividend). The effects of the small-user energy tax are compared with a general energy tax, while also different tax recycling mechanisms are considered.

        The simulations in this chapter show that the small-user energy tax (25 per cent for gas, 15 per cent for electricity, 25 per cent for coal and 20 per cent for other fuels for heating) causes a CO 2 reduction of 3.5 per cent while total emissions of greenhouse gases are reduced by 3.1 per cent. By recycling revenues of the small-user energy tax, employment increases by 0.10 per cent and existing tax distortions decrease, resulting in a higher national welfare of 0.06 per cent. The second best welfare improvement occurs due to the redistribution of existing tax distortions from labour to capital. When the tax base is broadened to all energy users and exemptions are ignored, welfare decreases by 0.02 per cent and the exchange rate increases by 0.25 per cent. This illustrates that in the case of a general energy tax, international competitiveness of the large energy-using industries deteriorates. Within agriculture, horticulture under glass is the most affected industry although the effects are small. Sensitivity analyses of the results show that the positive welfare effects of a small-user energy tax only apply at low tax rates. At higher tax rates, the negative distortionary effects of the introduction of a small-user energy tax dominate the positive effect of redistributing existing distortions from labour to capital. At a CO 2 reduction higher than 25 per cent, welfare costs of a small-user energy tax even become higher than welfare costs of a general energy tax, which is due to a broader tax base of the general tax.

        The results show that it is rational to exempt large users from an energy tax to avoid loss of international competitiveness. Only at high reduction levels might it be more efficient to tax large energy users as well, since then an increased tax base proves to be less distorting. Under the restrictions of the model used, a second dividend can be achieved by the introduction of a small-user energy tax. At low tax rates, a welfare improvement is even possible when the revenues of a small-user energy tax are recycled in a lump sum fashion. These typical second-best results occur due to an inefficient initial distribution of the tax burden. From a policy perspective the question remains, however, whether introducing an energy tax is the appropriate tool to reduce distortions caused by other taxes.

        The Dutch government has developed environmental policy targets, specified in terms of environmental indicators that measure phenomena like the greenhouse effect, acidification, eutrophication, and waste accumulation. Typically, each policy target entails a reduction in emissions that cause the environmental problem measured by the indicator. Chapter 5 analyses the environmental and economic effects of restricting these indicators, using a system of emission permits for the Netherlands. Indicators are linked to inputs, aggregate output, consumer goods and aggregate consumption at a very detailed level. Agriculture is an important contributor to these environmental indicators. The analysis focuses on the different effects of restricting single environmental indicators, the effects of restricting different environmental indicators simultaneously and the tradeability of emission permits.

        The results in this chapter show large differences in welfare losses as result of restricting different environmental indicators, which can be explained by the extent to which inputs, aggregate output, consumer goods and aggregate consumption can be substituted. In the case of waste emissions and to a lesser extent of eutrophication, where emissions are related to aggregate output and aggregate consumption, substitution is hardly possible and a reduction of emissions will therefore be very costly. In the case of acidification and greenhouse gas emissions, however, a reduction can be achieved by substitution of zero or low emission commodities for high emission commodities, which entails relatively low costs. Moreover, in the latter case, emissions are widely distributed over all industries and consumers, which, especially in the case of tradeable emission permits, offers scope for an efficient allocation of the emission reduction. These results emphasise the need for a very detailed emission matrix at a disaggregated level as applied in this chapter. The simulations also show that environmental policies might interact, when different environmental indicators are related to the same economic variables. When two or more environmental policy goals are set simultaneously, individual restrictions are less restrictive and hence shadow prices of restrictions will be lower. In addition, the welfare loss of an additional environmental restriction is relatively small. Finally, the simulations in this chapter show the potential benefits of a system of tradeable permits over a system of non-tradeable permits. When permits are tradeable, permit prices for 1 kg CO 2 equivalent (greenhouse effect), 1 mole H + (acidification), 1 kg N equivalent (eutrophication) and 1 kg waste (waste accumulation) at 10 per cent reduction of the concerning emissions are 0.04, 0.18, 1.52 and 3.37 guilders (1993) respectively. These are lower than the average shadow prices in the case of non-tradeability (0.13, 1.03, 21.43 and 9.41 respectively). The difference in welfare loss between non-tradeable and tradeable permits is largest in the case of eutrophication (5476 vs. 1060 million guilders) which is due to the large differences in eutrophication emission coefficients between agents.

        From a policy perspective, the simulations in this chapter give insight into the potential effects of achieving different environmental policy goals. Since both direct and indirect effects are taken into account in the AGE framework used, the links between environmental problems and economic activity are placed in a broad perspective. The simulation results show that the economic impact of an emission reduction depends largely on substitution possibilities. Since these possibilities are often limited, especially when emissions are related to output, there is a potential pay-off to increasing the search for low-emission technologies. Moreover, confirming the results obtained in earlier studies, the gain of a tradeable emission permit system over a non-tradeable system shows the need for a market-based approach when emissions have to be reduced. Finally, since restrictions on different environmental indicators might interact, there is clearly scope for policy co-ordination when multiple environmental policy goals are to be met.

        Chapter 6 focuses on the environmental and economic effects of an agricultural policy change. It analyses the effects of an increase in milk quota in the Netherlands when nitrogen (N) emissions in agriculture are restricted. This policy simulation is an example of an agricultural policy change that entails environmental effects. In addition, it clearly shows the linkages between agricultural industries. The AGE model applied in this chapter is written in mixed-complementarity format (AGE-MC model), in which dairy farming is represented by a series of different Leontief technologies. Each technology is characterised by a different emission-input-output mix. Consequently, technology switches make it feasible to reduce emissions without necessarily reducing output, which would be the case if emissions were related to output in a well-behaved neoclassical production technology.

        The results show that as milk quota rights become less scarce, the value of milk quota reaches zero. Since N emissions in agriculture are restricted, a higher production in dairy farming will lead to a positive and increasing shadow price of N emissions. At the point where milk quota is no longer restrictive, the shadow price is 0.99 guilders (1993) per kg N. A welfare gain can be reached by increasing milk quota while keeping N emissions at the same level. Under such a policy change, inactive N-extensive technologies in dairy farming become active and (partly) replace N-intensive technologies, while output in other agricultural industries decreases. The latter shows that policy measures taken in one industry may indirectly (through the market for N emissions) entail effects in other industries.

        The simulations in Chapter 6 show that results are sensitive to the specification of technology in dairy farming. The AGE-MC approach, using multiple Leontief technologies, seems to be more flexible than using the single CES technology. If the AGE-MC approach is adopted, results depend on the specification of the alternative (both existing and latent) technologies. Especially latent technologies are difficult to specify because of a lack of information. However, if this information is available the AGE-MC approach is a useful tool for policy analysis in cases where technology switches can be expected as a result of policy changes.

        The policy simulations in this thesis clearly reveal the economy-wide environmental and economic effects of agricultural and environmental policies and the interactions between these policies, in the Netherlands. However, the results should be interpreted with care for several reasons. First, since real policies are usually too complicated to be tackled in an economic model, there is always the chance of a certain degree of policy mis-specification. For example, the presence of energy covenants (in horticulture) or seasonal manure application norms are difficult to deal with in an AGE model. Second, it is worth mentioning that policies could be subject to large changes during the period in which applied policy research can be completed. Policies that first look premature, may eventually be implemented and finally turn out to be replaced or supplemented by other policies. Finally, the results are conditional on the model and data characteristics; for example, functional forms, specification of agents and commodities, and the static nature of the model. Therefore, for some of the critical assumptions (factor mobility, trade, and labour supply) sensitivity analyses were performed.

        Considering the remarks and conclusions in the preceding chapters, several suggestions for future research are coming to the fore. First, in order to get more insight into the interaction between agricultural and environmental policies, there are still some policy simulations left to deal with, like a simulation on pesticides policy and policy simulations related to the CAP reform. Second, since a drawback of the AGE model is that it is not econometrically estimated, maximum entropy econometrics (an estimation techniques for small samples) in combination with frequently published SAMs could be used in the future to (partially) estimate AGE models. Third, an interesting area of research might be to incorporate micro-econometric simulation models into AGE models. Many issues in environmental economics require both detailed insights at the level of the decision-making units (e.g., individual farms) and the consequences of such decisions for the environment and the economy as a whole. Micro-econometric simulation models, on the one hand, provide detailed insight at the level of the farm (sometimes sector) and incorporate technological differences between farms. AGE models, on the other hand, consider the linkages with the rest of the economy but are less detailed. Theoretically, a link is possible given that both types of model are based on micro-economic theory. Finally, it may be interesting in further research to consider regional differences in agriculture, using regional Social Accounting Matrices (SAMs). The appearance and functioning of rural areas is receiving increasing attention because of issues like rural employment, nature production and countryside maintenance and conservation. Since agriculture contributes to rural activity and largely determines the appearance of the countryside, regional differentiation is appropriate.

    An applied general equilibrium model for Dutch agribusiness policy analysis
    Peerlings, J. - \ 1993
    Agricultural University. Promotor(en): A.J. Oskam; M.T.G. Meulenberg. - S.l. : Peerlings - ISBN 9789054851646 - 254
    landbouwindustrie - industrie - landbouw - overheidsbeleid - landbouwbeleid - agrarisch recht - economie - evenwichtstheorie - statistiek - waarschijnlijkheidsanalyse - wiskunde - input-output analyse - modellen - econometrische modellen - wiskundige modellen - nederland - agribusiness - industry - agriculture - government policy - agricultural policy - agricultural law - economics - equilibrium theory - statistics - probability analysis - mathematics - input output analysis - models - econometric models - mathematical models - netherlands

    The purpose of this thesis was to develop a basic static applied general equilibrium (AGE) model to analyse the effects of agricultural policy changes on Dutch agribusiness. In particular the effects on inter-industry transactions, factor demand, income, and trade are of interest.
    The model is fairly general and could be used to analyse a great variety of agricultural policy changes. However, generality requires that the model should be adapted and extended for special research questions. This is shown in chapters 13 to 15 where the AGE model is used to examine the impact of the milk quota system and a reduction in livestock production for environmental purposes.
    The policy simulations performed serve in the first place as an illustration of the AGE model, in the second place they function as a source of information for policy makers and interest groups.
    The thesis consists of five parts; each part contains one or more chapters.
    Part I describes the purpose and method of research, and presents the structure of the thesis. The purpose and method have already been described above.
    Part 11 presents the concept of agribusiness (chapter 2) and gives a concise quantitative description of Dutch agribusiness (chapter 3). Industries or parts of industries with strong economic links, either on the input or output side, with agriculture belong to Dutch agribusiness, together with agriculture itself. In chapter 3 the size of Dutch agribusiness is measured in
    value added and employment. Agriculture had a share in total value added of 4 per cent in 1981 and 3.8 per cent in 1988, for agribusiness these shares were respectively 7.5 and 6.5 per cent. The quantitative description is made
    using input-output analysis. Chapter 3 also presents the data for the basic model. These data are given in expenditure and tax tables which show the flows of the value of transactions and income in the Dutch economy in 1981.
    Part III presents the basic AGE model. In the model there are 19 industries that produce 20 goods (dairy farming has two outputs). Four of these industries are agricultural industries (dairy farming, arable farming, livestock production and horticulture) and there are 6 other agribusiness industries (dairy manufacturing, meat manufacturing, grain mills, sugar factories, cocoa product manufacturing and food not elsewhere classified). The industries use intermediate inputs, imports and the services of primary inputs to produce outputs. The outputs of the industries are used domestically or exported. Industries operate in competitive input and output markets with free entry. Therefore they take prices as given. Industries maximize profits
    given their technology, which is described by multi-level production structures that consist of CES (Constant Elasticity of Substitution) production and CET (Constant Elasticity of Transformation) product transformation functions that include exogenous factor-augmenting technological change.
    Because of the competitive markets profit maximization is replaced by cost minimization and revenue maximization. The production structure is presented in chapter 5. In chapter 6 technological change is introduced into the production structure and the functional forms are chosen in chapter 7.
    Consumer demand (see chapter 8) partially determines the level and relative distribution of the output of industries. In the model there is one representative consumer or private household that owns the labour, land and part of the capital stocks in the economy. A fixed share of the total income of the private household is saved, the other share is used for expenditure on consumer goods. The total income of the private household is determined by the income earned from the supply of the services of the primary inputs corrected for taxes and subsidies and net income transfers.
    The private household maximizes a utility function given an income constraint, or because of the duality between the utility and expenditure function, minimizes expenditure given a fixed level of utility. Utility maximization results in a demand system related to the Linear Expenditure System (LES) that allows for substitution between consumer goods as a consequence of price and income changes.
    The supply of the services of primary inputs (see chapter 9) is not part of the utility function of the private household but is exogenous. This implies, for example, that there is no choice between labour and leisure in the model.
    The services of the primary inputs are used by industries according to the marginal returns of these services. It is assumed that the services are imperfectly mobile between industries. This is a distinct feature of the model. The factor rewards go to the owners of the primary inputs, who are: the private household (all the wages and land rents, and part of the capital rents), the government (part of the capital rents) and the rest of the world (part of the capital rents). The total availability of the primary inputs is exogenous to the model. This implies that, for example, immigration or other changes in the labour force are not modelled. Gross investment is modelled but it only affects spending and not the production capacity in the economy.
    Chapter 10 deals with trade in the basic AGE model. Imports are divided into competitive and complementary imports. The former are imported only by industries. The latter are also imported by the private household. The competitive imports are imperfect substitutes for domestic goods. The complementary imports have no domestic equivalent. For products from agribusiness a division has been made between the EC and rest of the world as regards competitive imports and exports.
    In the model the small country assumption is used in the sense that world market prices for imports and exports are exogenous variables in the model. This implies that the supply of imports and the demand for exports are perfectly elastic.
    To model import demand and export supply the Armington procedure is used. The Armington procedure assumes that imported, exported and domestically produced and used goods are imperfect substitutes.
    The government or public sector has three functions in the model (see chapter 11). Each function is performed by a special hypothetical institution.
    First, the Treasury can impose direct taxes, indirect taxes and tariffs. But it can also give export subsidies and income transfers. All taxes and subsidies in the basic model are represented by ad valorem taxes or tariffs. The Treasury can use policy instruments to influence prices, and hence interindustry transactions, income, etc.
    Second, the public services industry purchases commodities and the services of primary inputs to produce its output. It is treated as an ordinary industry in the model.
    Third, the public household performs the consumption and saving tasks of the public sector. It demands only one good: the output of the public services industry. The income of the public household is determined by the Treasury (by means of an income transfer) and the income from the supply of capital services. A fixed proportion of the income of the public household is borrowed (negative saving).
    In a general equilibrium model all input and output markets are in equilibrium. The other equilibrium conditions are a fixed public budget (the revenue and expenditure of the Treasury are equal), zero profits, the budget constraints of the private and public households, a fixed surplus on the trade balance, and equality of saving and investment. The model has a neoclassical closure in the sense that saving determines investment in the model.
    The model is calibrated using 1981 data. Calibration implies that the coefficients in the model are determined such that the model represents the base year situation. For the calibration procedure expenditure and tax tables were used (discussed in chapter 3) which show the value of transactions and income flows in the economy. In addition, values of the substitution and transformation elasticities are required. Both the expenditure and tax tables and the value of the elasticities are taken from Zeelenberg et al. (1991).
    A solution strategy and a solution algorithm are required to solve the model for alternative equilibria. The model is a collection of non-linear algebraic equations and is solved directly with a numerical solution technique included in GAMS, a computer package developed to solve for non-linear systems.
    The equilibrium conditions, calibration procedure and the model solution method are discussed in chapter 12.
    The basic model is a general framework. To analyse specific policy questions for agribusiness the basic model has to be modified. Part IV of the thesis examines the consequences of two specific policies; a supply quota for milk and a supply quota for livestock to protect the environment. First, detailed policy instruments were incorporated in the model (see chapter 13). These are variable import levies and export subsidies for dairy and meat imports and exports from outside the EC, and supply quotas for milk and livestock production. Some background information on the policy issues and the outcome of the policy simulations are presented in chapter 14 (a supply quota for milk) and chapter 15 (a supply quota for livestock).
    In chapter 14 a ceteris paribus analysis of different aspects of the introduction of milk quotas is given. The results provide some important insights.
    First, they reveal the dependence of the outcomes on EC and world market prices. This stresses the importance of trade for Dutch dairy production and agribusiness. The competitiveness of the Netherlands on the world market for dairy products is affected by the introduction of milk quotas because domestic prices change relatively to rest of the world market prices. For example, there is a growth of imports from the rest of the world and a relative increase in importance of the EC as the export market for Dutch dairy products.
    Second, the dependence of the outcomes on the degree of factor mobility is highlighted. The assumption in most AGE models of complete or totally incomplete factor mobility needs therefore to be reconsidered.
    Third, with low factor mobility, factor demand (e.g. employment) in dairy farming does not fall much but factor prices do, whereas with high factor mobility the primary inputs move out of dairy farming and the factor prices drop less because they more or less have to equalize between industries. The value of factor demand is larger with high factor mobility implying smaller quota rents and quota prices. It has to be remembered that factor mobility is low in dairy farming.
    Fourth, the effects on other industries of the introduction of milk quotas are substantial, especially for dairy manufacturing and grain milling, which includes the feed industry. Neglecting the effects in those industries would be misleading. However, the effects are less than predicted by input-output models because of the greater possibilities for input substitution in the AGE model.
    Fifth, the introduction of milk quotas increases welfare, measured in terms of GDP and the equivalent variation, although the rise is small. This is a second best result; quotas reduced the distortions caused by government intervention in dairy markets.
    Sixth, from a welfare-economic point of view price decreases, compared to supply quotas, are preferable when the production of milk, and therefore the support given to milk production, has to be reduced (GDP and the equivalent variation are higher). The welfare improving effects on industries are larger with price decreases than with supply quotas: output, factor demand, value added and trade change more. Especially in dairy farming, value added decreases much more in case of the price decreases. These large changes make price decreases in dairy farming politically difficult to achieve.
    Finally, the degree of output substitution in dairy farming between milk and cattle production is relatively unimportant for the effects of milk quotas.
    Of course the model results do not provide a definite answer to all issues regarding milk quotas. The strength of the model approach chosen is that it gives a consistent static analysis of the effects of the introduction of milk quotas on inter- industry transactions, price and income formation, factor demand, and exports and imports in Dutch agribusiness and economy as a whole.
    Many of the general issues discussed above are also relevant for the simulation of the introduction of supply quotas in the livestock industry (see chapter 15). In this simulation the difference between the effects of using supply quotas and a levy on the demand for compound feed were analysed. The low price elasticity of demand for compound feed made the differences in the effects on output and inputs between both policies small. However, there is a large difference in value added generated because with supply quotas quota rents are created that support income earned in livestock production. However, in the long run quota rights are just an ordinary production factor. This implies that in the long run livestock farmers are better off with levies on compound feed (because value added excluding rents is reduced less with the levy on compound feed).
    The meat manufacturing industry and the grain mills are affected substantially by both ways of reducing livestock. However, the effects for other industries are relatively small which indicates that the livestock industry is relatively small and isolated in the Dutch economy. Welfare losses measured by changes in the equivalent variation are greater in the case of supply quotas than in the case of the levy. This indicates that supply quotas for livestock cause more distortions than the levy for compound feed.
    Both supply quotas and levies on the demand for compound feed increase domestic prices relative to EC and world market prices. This implies a strong decrease of exports and increase of imports of livestock products.
    The last part of the thesis assesses the methodology and results, and draws conclusions. It is concluded that the model developed is a flexible and powerful too] for analysing the effects of agricultural policy changes on agribusiness and the economy as a whole. This is especially true in comparison with the input-output models that are traditionally used to analyse the economy-wide effects of agricultural policy changes, and with partial equilibrium models. The AGE model developed here provides valuable information for policy makers and interest groups on employment, income and trade in the economy as a whole.
    The AGE model has additional advantages. First, the model incorporates accounting consistency (for example budget constraints are taken into account as is market balance, in addition to basic macroeconomic identities such as the equality of saving and investment). Second, the model is theoretically consistent which makes the interpretation of the results relatively easy in spite of the fact that the model is rather large. Third, all interindustry effects are explicitly modelled, there is no need to make a choice regarding which linkages are important enough to model as in partial equilibrium models. Fourth, in a partial equilibrium model some results are quite obvious, for example introducing trade distortions reduces welfare. In a general equilibrium model this is no longer always the case because the effects on the rest of the economy are also taken into account. Finally, welfare analysis should be applied to the owners of the factor inputs, that is, the households. This is easy in the AGE model but not so easy in a partial equilibrium model. Changes in consumer and producer surplus and tax receipts are often a poor proxy for the real welfare changes in an economy.
    The broadness of our AGE model, however has its price. The model ignores much detail which is often present in partial equilibrium models. Moreover, the fact that the model is rather large and few data are available means that econometric estimates, and therefore econometric tests, of the behaviourial equations are impossible. However, use has been made of econometric estimates of substitution (AESs) and transformation elasticities (AETs) as presented by Zeelenberg et al. (1991). In the future, to make the results of the simulations more useful for policy analysis more technical information could be used (e.g. crop and livestock yields), more data about the development of the exogenous variables could be obtained (e.g. on world market prices) and more external information on AESs and AETs could be used. Although the model is unsuitable for predictions the clear structure and flexibility make it a useful tool for analysing the effects of agricultural policies in relation to different assumptions about key linkages between agricultural industries and the rest of agribusiness and the economy as a whole.

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