The basic linked system of the food and agriculture program at IIASA: An overview of the structure of the national models

Abstract

The main aim of the Food and Agriculture Program is to explore alternative solutions to the world's food problem. Towards this end a system of linked models will be used for policy analysis over a medium time horizon. The Basic Linked System of the FAP consists of national models which describe in detail the food and agriculture system of the corresponding country and contain a rather aggregate mapping of the respective nonagricultural sector. The interdependencies of the two sectors are modelled as well. In this paper, the methodological and computational requirements a model should fulfill in order to become linkable with the FAP's model system are discussed and an overview of the structure of the national models of those countries which were built at IIASA by members of the FAP is given. A national model consists of three components: one for supply, one for demand and a third describing the process of policy decision-making. The policy module provides a mapping from the objectives the policymakers pursue while deciding on policies into the space of policy instruments. Endogenizing the process of setting the level of the policy instruments rather than specifying them exogenously over the whole time span the model runs introduces more realism into the model, because governments react to changes occurring outside and/or inside of their country. The supply module consists of two subcomponents—one for agriculture and one for nonagriculture. The complexity of the decision-making process in agriculture is reduced to a two-stage process. In the first stage, farmers decide on the level of inputs they want to use for production. At the subsequent stage, these inputs are allocated to the various production activities and hence the amount of each commodity produced is decided on. The allocation process is modelled by using a nonlinear optimization program with statistically estimated parameters. Nonagricultural production is described in terms of a Cobb-Douglas function. For modelling demand an extended linear expenditure system is used. For developing countries the total population is divided into two income classes, whereas for developed countries the population is assumed to be homogeneous from the point of view of demand. The models are linked by applying the theory of general equilibrium. The markets are cleared simultaneously at the national and international level. It is assumed that supply cannot adjust during the exchange process and that the policy instruments are predetermined as well.