Adding Input Demands to Partial Equilibrium Agricultural Trade Models

There ha:J been a reoent proliferation of partial equilibrium multi commodity multi CDtmtry agricultural commodity trade models (QECD [8] Tyers and Anderson [ 11 ] , and the USDA [ 12 ] ) • Ou.•lle production side, these models explain output responses as a function.~•the prioes of outputs and at M~st a couple of variable input prices.No ex~llcit production technology is speclfilJd.Rather output price ela. . . . .ticlties with respect to output prices are cobbled together from available sources.These are then taken to prov1de a looal approximat1on to ttft underlying output side of the produotion technology.Because the models do not attempt to explain the demand ro~ all variable inputs they are defioient from a policy perspective as they car.not provide all the information of relevance to the policy deb~te.There is also the possibility that they may provide misleading insiGhts on policy issues although this prospect seems slight.In addition to the trade, world price, produotion and consumption information normally generated from partial equi.llbrlumtrade models, information is also required on the Lnpact of policy changes on:-national farm income; -labour demand; -partial equilibrium estimates of economic welfare; -the budgetary cost of policies; and -the unit price of fixed and quasi-fixed inputs, eg owner-operator "wage rates" and land prices.The theoretical work involved in this note was undertaken at the Agricultural Directorate, OEeD, Paris.The application reported in this note was undertaken at the Industries Assistance Commission, Australia.This wor~ has benefitted significantly through valuable contributions and suggestions made by Thomas Hertel.