Two ways of estimating a transport model

In this article, it is shown how the parameters of a transport model can be estimated in a way that, in contrast to previously used methods, utilizes regional prices as well as of trade costs. The proposed method uses bi-level programming to minimize a weighted least squares' criterion under the restriction that the estimated parameters satisfy the Kuhn-Tucker conditions for an optimal solution of the transport model. We use Monte-Carlo simulations to trace out some properties of the estimator and compare it with a traditional calibration method. The analysis shows that the proposed technique estimates prices as well as trade costs more efficiently.Public Economics,

Two Ways of Estimating a Transport Model

In this article, it is shown how the parameters of a transport model can be estimated in a way that, in contrast to previously used methods, utilizes observations of regional prices as well as of trade costs. The proposed method uses bi-level programming to minimize a weighted least squares criterion under the restriction that the estimated parameters satisfy the Kuhn-Tucker conditions for an optimal solution of the transport model. We use Monte-Carlo simulations to trace out some properties of the estimator and compare it with a traditional calibration method. The analysis shows that the proposed technique estimates prices as well as trade costs more efficiently.spatial equilibrium, transport model, bi-level programming, Research Methods/ Statistical Methods, C15, F11,

Regional crop supply behaviour in the EU

The objective of this paper is to present an evolution of PMP model suitable to estimate the revenue function and to provide price elasticity due to the variation of subsidies at farm level, especially if they are decoupled. This problem arises when individual data of farm households in a given region, coming from FADN, are used for implement PMP models finalized to policy analysis. This paper presents the theoretical background of the proposed innovations and empirical evidence on the basis of a sample of farms included in FADN database in Italy.Bayesian estimation, errors-in-variables, PMP, Crop Production/Industries,

Estimation of supply response in CAPRI

The primary objective of this paper is to estimate behavioural parameters of the quadratic regional supply models in the modelling system CAPRI, using the time series data in the CAPRI database. A secondary objective is to replace the constant yields of the original model by functions that depend on input use. Due to lack of statistical robustness, the second objective is not achieved, thus yields remain constant. A Bayesian highest posterior density estimator is developed to address the primary objective. After discarding regions with insufficient data, parameters for up to 23 crop production activities with related inputs, outputs, prices and behavioural functions are estimated for 165 regions in EU-15. The results are systematically compared to the outcomes of other studies. For crop aggregates (e.g. cereals, oilseeds etc.) on the level of nations, the estimated own price elasticities of supply are found to be in a plausible range. On a regional level and for individual crops, the picture is much more diverse. Whether the regional results are plausible or not is difficult to judge, since no other study of similar regional and product coverage is known to the author.Bayesian estimation, errors-in-variables, PMP, Research Methods/ Statistical Methods, Q11, C32,

Modelling the Impact of Compulsory FMD Insurance

This paper compares two ways of financing the combating of Foot and Mouth Disease (FMD) in the EU and uses a simulation model to determine the welfare and production implications of the two systems. The two systems analysed are (i) financing by the tax payers, resembling the system currently in place, and (ii) a compulsory insurance scheme where all costs are converted into regionally differentiated insurance premiums that are paid by the producers. The analysis indicates that welfare gains may be realised by shifting from the former to the latter financing system.foot and mouth disease, insurance scheme, Risk and Uncertainty, D61, Q18,

A BAYESIAN ALTERNATIVE TO GENERALIZED CROSS ENTROPY SOLUTIONS FOR UNDERDETERMINED ECONOMETRIC MODELS

This paper presents a Bayesian alternative to Generalized Maximum Entropy (GME) and Generalized Cross Entropy (GCE) methods for deriving solutions to econometric models represented by underdetermined systems of equations. For certain types of econometric model specifications, the Bayesian approach provides fully equivalent results to GME-GCE techniques. However, in its general form, the proposed Bayesian methodology allows a more direct and straightforwardly interpretable formulation of available prior information and can reduce significantly the computational effort involved in finding solutions. The technique can be adapted to provide solutions in situations characterized by either informative or uninformative prior information.Underdetermined Equation Systems, Maximum Entropy, Bayesian Priors, Structural Estimation, Calibration, Research Methods/ Statistical Methods, C11, C13, C51,

Dynamic impacts of a financial reform of the CAP on regional land use, income and overall growth

In this paper we investigate the impacts of abolishing the Common Agricultural Policy (CAP) for the post-2013 European Union (EU) financial perspective and the impacts of re-investing the released funds on research and development (R&D). We apply a linked system of models to analyze the impacts for the EU member states. The linked system consists of five land-use sector models (agriculture, forestry, urban area, tourism and transport infrastructure), which are connected to a macro-econometric model. Additionally, a land cover model is used to disaggregate land use countries to a 1 km² grid. Three scenarios are analysed. In the “baseline” currently decided policies are assumed to be continued until 2025. In the “tax rebate” scenario agricultural support (first pillar) is removed, and the member states’ contributions to EU lowered. In the “R&D investments” scenario agricultural support is also removed, and the released funds are used to increase general R&D efforts in the EU. We find that in both liberalization scenarios, agricultural producer prices drop compared to the baseline. Agricultural production drops too, but less so in the “R&D investment” scenario due to productivity gains resulting from the increased R&D spending. In some countries, the productivity gains totally offset the negative impact of liberalisation on agricultural production. Smaller agricultural production implies less agricultural land use, and the more so in the “R&D Investment” scenario where productivity increases. The fall in agricultural production and prices negatively affects economic activity and households’ purchasing power, but the reduced direct taxation compensates this effect and results in a GDP gain of 0.53% and 0.8 million additional jobs. In “R&D investment” GDP gain reaches 2.57% and yields 2.95 million additional jobs in EU in 2025. The GDP, consumption and employment gains in the “R&D Investment” scenario widely exceed the losses in the agriculture sectors. The analysis indicates that if no external effects of agriculture are considered, then the CAP is an inefficient use of tax money, and that a considerable contribution to reaching the goals of the Lisbon agenda would be achieved if the same amount of money was instead invested in R&D.CAP reform, economical growth, land use, Agricultural and Food Policy, Land Economics/Use,

Impact of Agricultural and Trade Policy Reform on land-use within the EU

Land Economics/Use,

European farming and post-2013 CAP measures. A quantitative impact assessment

Following the paradigm for reforming the current CAP, the first objective of this study is to give insights into the economic impact of post-2013 CAP measures at different levels of aggregation (e.g. EU, Member State and region). The post-2013 CAP measures included are directed towards income for the farmers, competitiveness, valuable areas and ecosystem services. The second objective is to analyse the impact of a scenario that combines the above mentioned post-2013 CAP measures. This study can be seen as a first attempt to quantify the transition to a CAP with more targeted measures at the European level and reveals considerable methodological and data challenges. A key finding is that the impact of the various measures is very different with regard to various economic indicators.Agricultural and Food Policy,

Linking models for land use analysis: experiences from the SENSOR project

In order to quantify the effects of a comprehensive set of policies on land use, interaction between sectors needs to be accounted for, while maintaining a high level of detail for each sector. This calls for a combination of sector specific and sector wide models. This paper describes such a modelling system, with emphasis on the linking of the models to a coherent system. Five sectors of significant importance for land use are modelled individually: Forestry, agriculture, urban land use, transport infrastructure, and tourism. All models are connected as sub-modules to an economy-wide partial econometric model. In addition, a land cover model is used to disaggregate land use down to 1km grid resolution. The linking of such a diverse set of models in a consistent way poses conceptual as well as practical issues. The conceptual issues concern questions such as which items of the models to link, how to obtain a stable joint baseline scenario, and how to obtain a joint equilibrium solution for all models simultaneously in simulation. Practical issues concern the actual implementation of the conceptually sound linkages and provision of a workable technical solution. The linked system allows us to introduce a shock in either of the models, and the set of results will provide a joint solution for all sectors modelled in SENSOR. In this manner, the models take a complex policy scenario as argument and compute a comprehensive set of variables involving all five land use sectors on regional level, which in turn forms a basis for distilling out the impact on sustainability in the form of indicators. Without the extensive automation and technical linkages, it would not have been possible to obtain a joint equilibrium, or it would have required exorbitant amounts of working time.Model linking, sustainable land use, cross sector modelling, iterative recalibration, Land Economics/Use,