Adding Value to Existing Models of International Agricultural Trade

Abstract

The computable general equilibrium (CGE) model described in this paper represents an effort to build a bridge between partial equilibrium models of agricultural trade and tiieir general equilibrium counterparts. Most of tiie information in the general equilibrium model is based on data in tiie U.S. Department of Agriculture's partial equilibrium SWOPSIM (Static Worid Policy Shnulation) models. The CGE model illustrates the process and problems associated with the construction of a general equilibrium model based largely on data from a partial equilibrium model. The process of building the general equilibrium model uncovers many areas in which the partial equilibrium model's specifications can be improved. The general equilibrium model highlights the importance of accounting for all agricultural activity, it offers a mechanism for incorporating nonfarm shocks to tiie model, and it provides simple and straightforward estimates of the welfare implications of agricultural policy liberalization.