ENDOGENOUS TRANSACTION COSTS AND TRADABILITY IN A MICRO ECONOMYWIDE MODEL - A STYLIZED APPLICATION WITH NONSEPARABLE HOUSEHOLDS

This paper analyzes effects of transaction costs on household responses, adding to direct effects via price-bands, indirect effects through reduced availability of productive resources and through changes in price formation. A micro economywide model with nonseparable household models is developed, in which transaction costs determine effective prices through an endogenous, household-specific price-band. Moreover, transaction costs influence household decisions by claiming productive resources, and by affecting endogenous prices at household or micro-economy level. Comparison of two stylized village model specifications indicates that indirect effects of transaction costs reduce household supply response, despite reducing the range of prices for which households operate within their price-band. Results show that transaction costs need to be identified in terms of commodities used for transactions, and in terms of tradability of these commodities, to account for indirect effects of transaction costs.Research Methods/ Statistical Methods,

EURO-MEDITERRANEAN PARTNERSHIP; STATE OF AFFAIRS AND KEY POLICY AND RESEARCH ISSUES

This study draws on a body of existing literature to take stock of the Euro-Mediterranean Partnership (EMP), which focuses on establishing a Mediterranean Free Trade Area. Despite considerable scope for reducing barriers on Mediterranean trade, current agreements are limited to a quasi-unilateral reduction of trade barriers for manufactured products by the Mediterranean Partner Countries. Next to the limited scope of the current liberalisation achieved by the Euro-Mediterranean Partnership, structural features of the MPCs limit the impact of the trade liberalisation on their economic growth. To promote stability and economic growth at the Southern borders of the EU, coherence of EU trade and foreign policy is called for.Agricultural and Food Policy,

A typical application of SEAMLESS-IF at macro level: a trade liberalization scenario applied to the EU

Agricultural and Food Policy, Environmental Economics and Policy, Land Economics/Use, Production Economics,

Poverty Targeting, Resource Degradation and Heterogeneous Endowments A Micro-Simulation Analysis of a Less Favored Ethiopian Village

Persistent and widespread poverty in less favored areas (LFAs) is attributed to fragile natural resources and poor markets. Limited assets may keep households outside the reach of poverty policies targeted at LFAs. We explore in a stylized manner the role of heterogeneous household assets for (1) policies aimed at poverty reduction; (2) within-village income inequality; (3) soil erosion. With a farm-household microsimulation model we analyze for each household in a remote Ethiopian village three sets of policies: technology improvement, infrastructure investment, and off-farm employment through migration or cash for work (CFW) programs. Combating poverty with a single policy, migration reduces the poverty headcount most. Because of self-selection, CFW programs performed best in terms of reaching the poorest of the poor. CFW also reduce within-village income inequality most, while a price band reduction increases income inequality. Only technology improvements imply a trade-off between poverty and soil erosion. Price band and off-farm employment reduce erosion while outperforming technology improvements in terms of poverty reduction. Combining two policies helps poorer households to overcome the limitations of their asset endowments. Combining a cash for work program with a reduction in price bands yields most in terms of poverty reduction and income inequality. This policy complementarity is less important for better endowed households. Reducing the reliance of households on agriculture offers a winwin situation of reducing poverty and maintaining natural resources. Combining policies helps to overcome asset limitations, to target policies to the poorest households and to reduce income inequalities.less-favored areas, farm households, poverty, erosion, micro-simulation, Ethiopia, Food Security and Poverty, Resource /Energy Economics and Policy, C6, Q12, Q56,

Test Scenarios for Global and Country Level Analysis, including baseline

Agricultural and Food Policy, Environmental Economics and Policy, Land Economics/Use,

China's New Rural Income Support Policy: Impact on Grain Production and Rural Income Inequality

The impact of China's new rural income support policy and recent price trends on grain production and rural income inequality is assessed for two villages with different degrees of market access in Northeast Jiangxi Province. Two village-level general equilibrium models are used to analyze household decision making and interactions between households within these villages. Parameter estimation and model calibration is based on data collected during an extensive survey held in these villages in the year 2000. The household classification used in these models allows us to draw conclusions that are relevant for many other villages and regions in China. Simulation results show that the income support policy does not reach its goal of promoting grain production. The increased incomes allow farm households to buy more inputs for livestock production, which is a more profitable activity. Moreover, because leisure is valued higher with increasing incomes, farmers tend to switch to less intensive rice production. Selling of rice outside the villages declines more than rice production due to the higher own consumption of households. We further find that agricultural tax abolition has a much larger impact on incomes and production than the direct income support in 2004. Both measures tend to reduce income inequalities within villages, because the richest household groups (who are more involved in off-farm employment) benefit less. Tax abolition, however, tends to widen income inequalities between villages, because the absolute income gain is much larger in relatively rich villages. The switch from rice production towards more profitable activities like livestock production is therefore much stronger in these villages.income policy, grain production, income inequality, villages, CGE model, China, Consumer/Household Economics, Crop Production/Industries, O20, Q12, R15,

Mediterranean Association Agreements and European Security

Agricultural and Food Policy,

Rural Livelihoods: Interplay Between Farm Activities, Non-farm Activities and the Resource Base

A concentration of poor in rural areas has resulted in a research and policy focus on agricultural technologies and (poor) households impact on soil productivity. But farm households do not live of farming alone, non-farm activities play a principal role even in remote areas. With a unique household-level dataset covering seven regions in Africa and two in Asia we analyze (1) the importance of non-farm income in different geographical zones; (2) the role of geographical factors in determining access to non-farm employment; (3) the role of non-farm income in external input use and soil nitrogen balances. Distinguishing geographical zones based on the distance to urban areas we find the share of non-farm income increasing from 12 percent in the remote areas to 35 percent in peri-urban areas. Geographical location is found to explain a major part of the variation in individual non-farm participation, besides characteristics like education and gender. At household level we find non-farm income not playing a role of significance in explaining external input use, inorganic fertilizer use nor changes in the nitrogen balance. Households thus appear not to invest non-farm income in agriculture. This limits the contribution of non-farm income to reducing widespread soil nutrient depletion witnessed in Africa.off-farm income, rural development, micro-economics, Labor and Human Capital, Q12, D1, J43, Q24,