Economic impacts of agricultural policy responses to the outbreak of COVID-19

Abstract

The aim of this article is to evaluate the general economic impact of the policies focused on the agricultural sector decreed by the Colombian government within the State of Economic, Social, and Ecological Emergency to mitigate the negative effects of the COVID-19 pandemic on this sector. We use a computable general equilibrium model, calibrated with a social accounting matrix that was expanded to focus on specific crops and considered different sizes of agricultural production units. We find that, in general, this set of policies does not have adverse effects but increases the agricultural production of the units receiving the incentives, especially of small and medium-sized farms. In turn, they also increase the demand for unskilled labor, rural households’ disposable income, and consumption compared with pre-covid levels. The results are conditional on the options to finance this set of policies. Also, depending on the financing option, the income gap between rural and urban areas could either narrow or widen.