A dynamic model of regional agricultural economic development as a tool for the appraisal of rural reconstruction projects

Abstract

Summary This article deals with an operational model with which it is possible to quantify over a long period of time the benefits for agriculture of a rural reconstruction projects. Characteristic of this model — in comparison with other regional models which usually deal with regional magnitudes or averages of farm groups — is that it describes the economic development of individual farms. This low aggregation level requires provisions for problems specific to this level. Some provisions are now introduced in the model in a provisional way. It is possible, however, to apply to a greater extent econometric methods in estimating the model coefficients. Although the results already are reasonably plausible, this will improve the validity of the model. Furthermore, a more explicit treatment of price changes will emphasize the conditional nature of the results. Application of this type of model is not confined to the field of benefit-cost analysis of rural reconstruction projects. Especially where the distribution effect of governmental policies (for instance on income and farm size) is a subject of study it is attractive to make use of this type of model.