The CMEA Agricultural Model in the FAP/BLS System

NOT FOR QUOTATION WITHOUT PERMISSION OF THE AUTHOR

Csaba Csdki L&zlo Zedld

April

1986 WP-86-17

Working Fnpers are interim r e p o r t s o n work of t h e I n t e r n a t i o n a l I n s t i t u t e f o r Applied Systems Analysis a n d h a v e r e c e i v e d only lim- i t e d review. V i e w s or opinions e x p r e s s e d h e r e i n d o n o t n e c e s - s a r i l y r e p r e s e n t t h o s e of t h e I n s t i t u t e or of l t s National Member Organizations.

INTERNATIONAL INSTITUTE FOR APPLIED SYSTEMS ANALYSIS 2361 Laxenburg. Austrla

FOREWORD

Understanding t h e n a t u r e and dimensions of t h e world food problems and e x p l o r a t i o n of policies available to a l l e v i a t e them h a s been t h e f o c a l point of IIASA's Food a n d Agriculture P r o g r a m (FAP) s i n c e i t began in 1977.

Over t h e y e a r s FAP h a s , with t h e help of a network of collaborating institutions, developed and linked national policy models of twenty coun- t r i e s , which t o g e t h e r a c c o u n t f o r n e a r l y 8 0 p e r c e n t of important a g r i c u l - t u r a l a t t r i b u t e s s u c h as a r e a , production, population, e x p o r t s . imports a n d so on. The remaining c o u n t r i e s are r e p r e s e n t e d by 1 4 somewhat s i m p l e r models of g r o u p s of c o u n t r i e s . This system of models, t h a t we c a l l t h e Basic Linked System (BLS) permits analysis of national and I n t e r n a t i o n a l policies in a global c o n t e x t .

The economies of t h e CMEA (Council of Mutual Economic Assistance) member c o u n t r i e s play a n important r o l e o n t h e world a g r i c u l t u r a l t r a d e . The FAP of IIASA h a s invested s u b s t a n t i a l e f f o r t in t h e investigation of t h e a g r i c u l t u r a l system of t h e CMEA c o u n t r i e s . The CMEA Agricultural Model w a s c o n s t r u c t e d as o n e of t h e models of t h e BLS. The model treats t h e Euro- p e a n CMEA member c o u n t r i e s , including t h e Soviet Union, as o n e a g g r e g a t e . In f a c t , two v e r s i o n s of t h e CMEA Agricultural Model h a v e b e e n developed so f a r . In t h i s p a p e r Csaba Cs&i and LlIszlo Zedld give a d e t a i l e d d e s c r i p t i o n of t h e s t r u c t u r e a n d mathematical background of t h e second v e r s i o n of t h e model (CMEA/2). The CMEA/1 model, as well as r e s u l t s of t h e investigations with t h e f i r s t FAP/CMEA model were p r e s e n t e d e a r l i e r in t w o publications, see C. Csaki (1982) and (1985).

K i r i t S. P a r i k h P r o g r a m L e a d e r Food and Agriculture Program.

The authors would llke to e x p r e s s their thanks to Giinther Fischer f o r his contributions to t h e computer Lmplementation of the model, t o V. Iak- imets, K . Parikh and F. Rabar f o r their comments on the model and t o B . Hauser f o r typing the material.

CONTENTS

1. GENERAL CHARACTERISTICS OF THE CMEA/2 MODEL 2. MATHEMATICAL DESCRIPTION

2.1. Economic Planning Submodel

2.1.1. Module E P / l : Overall Objectives 2.1.2. Module EP/2: Adjustment of Objectives 2.1.3. Module EP/3: Consumption T a r g e t s 2.1.4. Module EP/4: Investment T a r g e t s

2.1.5. Module EP/5: Setting U p p e r a n d Lower Bounds 2.2. P / P r o d u c t i o n Submodel

2.2.1. Module P / 1 : Domestic P r i c e s 2.2.2. Module P/2: Population R e s o u r c e s 2.2.3. Module P/3: L a b o r F o r c e s

2.2.4. Module P/4: Capital S t o c k in A g r i c u l t u r e 2.2.5. Module P/5: F e r t i l i z e r Input

2.2.6. Module P/6: Agricultural P r o d u c t i o n 2.2.7. Module P/7: Weather E f f e c t s

2.2.8. Module P/9: Non-Agricultural P r o d u c t i o n 2.3. R: Realization

2.3.1. Module R/1: World Market P r i c e s 2.3.2. Module R/2: Exchange

R e f e r e n c e s

THE CldEA AGRICULTURAL MODEL IN THE FAP / B E SYSl'EX

O a b a C s 4 k i a n d L d s z l 6 Zeold

1. GENERAL CHARACTERISTICS OF THE CMEA/2 MODEL

The Food and Agriculture P r o g r a m of IIASA h a s been engaged in t h e develop- ment of a set of linkable national models f o r a g r i c u l t u r a l policy analysis s i n c e 1976, with t h e help of a network of collaborating institutions a r o u n d t h e world.

The p u r p o s e of t h e FAP i s to study t h e e f f e c t o n policy measures as t a k e n by t h e i r own governments, by t h e governments of o t h e r c o u n t r i e s and by i n t e r n a t i o n a l organizations which o p e r a t e u n d e r specified i n t e r n a t i o n a l agreements. The basic elements of t h e FAP model system are t h e n a t i o n a l p o l i c y models developed o n t h e basis of a joint methodology. A s p e c i a l linkage methodology w a s developed in o r d e r to c r e a t e t h e global food system. F o r f u r t h e r information on t h e s t r u c t u r e of t h e FAP national models and t h e linkage methodology see M. Keyzer (1981).

The FAP global a g r i c u l t u r a l model s y s t e m called t h e Basic Linked System (BLS): f o r f u r t h e r information a b o u t t h e BLS see G. F i s c h e r and K. F r o h b e r g (1980), consists of twenty o n e models linked t o g e t h e r . Of t h e s e twenty o n e models, 18 r e f e r to individual c o u n t r i e s , t w o refer t o t h e EC and t h e CMEA and o n e t o t h e r e s t of t h e world. These models h a v e been developed at IIASA in c o o p e r a t i o n with s c i e n t i s t s of t h e r e s p e c t i v e c o u n t r i e s . The BLS d e s c r i b e s t h e international t r a d e at 10 s e c t o r s l e v e l , namely, wheat, rice, coarse g r a i n , bovine and ovine meats, d a i r y p r o d u c t s , o t h e r animal p r o d u c t s , p r o t e i n f e e d s , o t h e r food, nonfood a g r i c u l - t u r e , a n d nonagriculture. However, some of t h e national models have a d i f f e r e n t s e c t o r a l detail.

Within t h e FAP, a s p e c i f i c modeling framework w a s developed to r e p r e s e n t t h e c e n t r a l l y planned food and a g r i c u l t u r e systems in t h e global investigations. This modeling a p p r o a c h

i n c o r p o r a t e s t h e b a s i c f e a t u r e s of t h e CMEA member c o u n t r i e s ' economy

.

o f f e r s o p p o r t u n i t i e s t o include t h e c o u n t r y s p e c i f i c f e a t u r e s

i s detailed enough to b e used as a n experimental tool f o r a c t u a l planning and f o r e c a s t i n g p u r p o s e s

IIASA's modeling framework f o r c e n t r a l l y planned food and a g r i c u l t u r e sys- tems was f i r s t applied f o r t h e development of t h e Hungarian Agricultural Model (HAM), see (Csaki, 1901). The a g g r e g a t e d CMEA Agricultural Model h a s been con- s t r u c t e d by using t h e e x p e r i e n c e gained with HAM and by t h e f i r s t v e r s i o n of t h e BLS c o u n t r y models. Actually two v e r s i o n s of t h e CMEA Agricultural Model h a v e been developed.

ChfEA/I Model w a s built in 1980-81 with a detailed commodity c o v e r a g e (22 food and a g r i c u l t u r e commodities) consistent with t h e commodlty classification of FAO's Agriculture Toward 2000 P r o j e c t . The model is divided into two major p a r t s : t h e f i r s t submodel d e s c r i b e s t h e a g r i c u l t u r a l system of t h e Soviet Union and t h e second includes t h e smaller E u r o p e a n CMEA c o u n t r i e s , namely, Bulgaria, Czechoslovakia, t h e GDR, Hungary, Poland and Rumania. The two submodels have a completely identical s t r u c t u r e a n d c a n b e o p e r a t e d independently of e a c h o t h e r . The CMEA/l model h a s n e v e r been linked to t h e BLS, i t h a s only been used in a stand-alone mode f o r mid- and long-range p r o j e c t i o n s on limits and potentials of a g r i c u l t u r a l development in t h e CMEA c o u n t r i e s . F o r a detailed account of CMEA/l experiments. see C. Csaki (1982).

The C M A / 2 Model represents t h e CMEA region in the current version o f t h e BLS. The model is designed along t h e same principles as t h e CMEA/l model and also fully consistent with t h e other elements o f t h e BLS. The commodity classification follows t h e one used in t h e BLS and t h e production model block is constructed by using the overall methodology and based on t h e same data base from FA0 as other country models. Due t o t h e specific features o f the centrally planned food and agriculture systems o f t h e C M E A , the model has several specific features as well.

Figure 1 shows t h e structure o f the CMEA/2 Model.

In the CMEA member countries agricultural policy and policy goals are deter- mined by the f a c t that they are integral parts o f t h e central plan f o r t h e whole national economy. The targets f o r production and consumption are fixed in t h e national plan and are realized by a coordinated system of-sectoral, industrial, agricultural, etc.,--regional, local and enterprise plans. Though the indirect pol- icy instruments o f price, market, t a x , credit and interest policy are used t o an increasing extent t o realize targets, their role and the way in which they are implemented are rather d i f f e r e n t from those in market economies. First o f all, one should point out t h e following characteristics:

-

The agricultural and t h e domestic market o f t h e CMEA countries are not directly related t o t h e world market. Protection is implemented not by price and tax policy instruments, but mainly b y administrative means, e.g.. govern- ment foreign trade monopoly, central decisions on export and import o f agri- cultural products.

-

Decisions on t h e desired growth o f personal consumption and investment allo- cation to agriculture are made within the framework o f t h e five-year national plans.

-

Domestic producer prices are not directly related t o international prices, they are generally fixed f o r a given year and changed mainly to adjust t o changing production expenses.

-

Producing firms have no direct relation t o t h e world market. Exports and imports are carried over by government foreign trade agencies.

-

Availability o f foreign currencies and Labor flows are controlled by t h e cen- tral planners.

-

Consumer prices are set based on central income and wage policy targets and they do not r e f l e c t t h e actual supply demand relations.

The CMEA/2 model in t h e BLS is constructed t o r e f l e c t t h e above mentioned conditions. Thus,

-

Domestic prices are not endogenized and are expressed in rubles.

-

In t h e model t h e desired growth o f t h e overall economy, al, the desired growth o f consumption, a2. and t h e desired share o f food and agriculture in total investment funds, a3, are taken exogenously with lower and upper bounds determining t h e desired path. Adjustment mechanism is also built in t o keep these targets as much as possible.

-

Lower and upper bounds are introduced in the production module t o assure self-sufficiency requirements o r limit production growth ln certain commodi- ties.

-

Modeling o f consumption is based on FA0 trends, see "Agriculture Toward 2000" ( F A O ) , estimations and targets on private consumption published in CMEA countries.

Figure 1: O v e r a l l Structure o f the C M E A / 2 A g r i c u l t u r a l M o d e l

-

The e x c h a n g e model built into t h e model e x p r e s s e s p r e s e n t p r a c t i c e and assumed p r e f e r e n c e o r d e r i n g of areas w h e r e t h e adjustment t o changes in t h e conditions of t h e world m a r k e t t a k e s p l a c e . In t h e p r e s e n t v e r s i o n t h e p r e f e r e n c e o r d e r i n g of adjustment i s s t a t e d as follows:

adjustment of s t o c k s of t h e nonagricultural commodity;

stock adjustment o f a g r i c u l t u r a l commodities;

.

modification of government e x p e n d i t u r e s ;

modification of investment in t h e rest of t h e economy;

.

modification of investment in a g r i c u l t u r e ;

adjustment of p r i v a t e consumption of t h e n o n a g r i c u l t u r a l p r o d u c t ;

.

modification of food consumption

-

The model c a n b e r u n with v a r i o u s assumptions on domestic p r i c e policy. I t i s possible t o u s e unchanged domestic p r i c e s f o r t h e whole r u n , while i t c a n a l s o b e assumed t h a t if a world m a r k e t p r i c e c h a n g e s s t r o n g l y in a p e r s i s t e n t way o v e r a long p e r i o d of time, t h i s will r e s u l t in c h a n g e s of domestic p r i c e s of CMEA c o u n t r i e s . A logistic function i s used p r o p o s e d b y 0 . Gulbrandsen.

w h e r e t h e transmission of t h e world market p r i c e c h a n g e i s v e r y limited with small c h a n g e a n d grows with l a r g e p e r s i s t e n t changes. O t h e r p r i c e policies might a l s o be included in t h e model.

2 . MATHEXATICAL DESCRIPTION

A s F i g u r e 1 shows t h r e e major submodels are d i f f e r e n t i a t e d within t h e model as follows:

EP: Economic Planning

P: P r o d u c t i o n

R: Realization

The Economic R u n n i n g Submodel r e f l e c t s t h e decision making a n d economic c o n t r o l a c t i v i t i e s of t h e government. The o v e r a l l t a r g e t s guiding t h e o p e r a t i o n of t h e whole system a r e set h e r e . T h e r e are f l v e modules within t h i s submodel.

The P r o d u c t i o n Submodel r e l a t e a g r i c u l t u r a l a n d nonagricultural produc- tion. R e s o u r c e s a n d domestic p r i c e s are set a l s o in t h i s module. The random e f f e c t s of w e a t h e r upon c r o p production c a n a l s o b e t a k e n into account. The sub-

model P is s t r u c t u r e d a c c o r d i n g t o nine modules.

The R e a l i z a t i o n Submodel d e s c r i b e s p r o d u c t utillzation, demand a n d r e l a - tions t o t h e i n t e r n a t i o n a l m a r k e t . T h e r e are f o u r modules in t h i s submodel. The model i s dynamic, with a o n e y e a r time increment. The b a s i c methodology used i s a simulation technique. Next t h e mathematical d e s c r i p t i o n of t h e model i s p r e s e n t e d a c c o r d i n g t o t h e s t r u c t u r e outlined above. The a c t u a l values of p a r a m e t e r s used

in t h e p r e s e n t v e r s l o n of t h e model are a l s o llsted.

2.1. E c o n o m i c P l a n n i n g S u b m o d e l

This submodel i s d e v o t e d t o introduction of government policy objectives.

2.1.1. M o d u l e E P / l : O v e r a l l objectives

The major government o b j e c t i v e s are t a k e n i n t o consideration in a n exo- genous manner within t h e model. The t h r e e major exogenous p a r a m e t e r s given f o r t h e system are as follows:

1. Desired growth of t h e n a t i o n a l income:

al (=0.05)

2. Desired growth of p e r s o n a l c o n s u m p t i o n : h e r e lower and u p p e r bounds are given f o r t h e annual growth rate of t h e t o t a l p e r s o n a l consumption

a2 mi, ( a ) a n d

a 2

,,,

( a . 1 )

3. Desired s h a r e of a g r i c u l t u r a l i n v e s t m e n t in t h e t o t a l investment funds:

h e r e a l s o Lower and u p p e r bounds are s e t : a 3 ( a . 1 ) a n d l e s s o r equal to

a 3 ( a . 3 )

2.1.2. M o d u l e EP12: A d j u s t m e n t o f O b j e c t i v e s

The major exogenous p a r a m e t e r s are updated at t h e beginning of e a c h simu- l a t e d time increment.

1 . National Income

The t a r g e t e d national income is computed by PNIC,

=

NICt-, ( l + a , )

where NICt -1: t h e a c t u a l national income in t h e p r e v i o u s y e a r . 2 . P e r s o n a l C o n s u m p t i o n

The planned value of t o t a l p e r s o n a l consumption in y e a r t i s PCONSt

=

( 1

+

aZt)

where CONSt-, : t h e a c t u a l value o f total p e r s o n a l consumption in t h e previous y e a r . The azt p a r a m e t e r i s adjusted in t h e following way

i f : sa2

<

s2 t h e n a2, i n c r e a s e s a z t

=

a2t-1

+

0.5(s2 ^d,

-

s a 2 ) ( ~ 2

=

0.04)

if: sa2

>

s2 maX, t h e n a2, d e c r e a s e s ,

a2t

=

a2t-1

-

^{0.5 (sa2}

-

^s2

(s2 msx

=

0.09) i n a l l o t h e r c a s e s a2t

=

a 2 t - 1

3. A g r i c u l t u r a l I n v e s t m e n t S h a r e

Total investment t a r g e t :

PINV,

=

PNIC,

-

^PCONS,

Agricultural investment t a r g e t :

PINVA,

=

a,,

*

PINV, Nonagricultural investment t a r g e t :

PINVN,

=

( 1 -a3,) PINV, The a3, p a r a m e t e r is adjusted in t h e following way:

GNPA,

sa

- -

-1

GNPAt-l where

GNPA i s g r o s s national p r o d u c t of t h e a g r i c u l t u r a l sector

iy: sa3

<

s3 t h e n a3, i n c r e a s e s .

a 3 ~

=

a3t-l + ('3 min

-

'a3) ( ~ 3 min

=

0.03)

if: sa3

>

s3 max. t h e n a3, d e c r e a s e s

a3,

=

a3,-1

-

^(sa3

-

s3 max) ( ~ 3 max

=

0.06)

i n all other cases a3t

=

a3t -1

4 . Stocks

The d e s i r e d s t o c k s are set as a ratio to t h e previous y e a r ' s a c t u a l p e r s o n a l consumption

w h e r e

DS,,, : d e s i r e d s t o c k f o r t h e i-th commodity

TCI,t-l : p r e v i o u s y e a r a c t u a l consumption from t h e i-th commodity

nI

^: d e s i r e d s t o c k level Table 1

2.1.3. Module EP/3 Consumption Targets

The t a r g e t s f o r p e r s o n a l consumption are computed by using t r e n d functions.

which h a v e b e e n estimated o n t h e basis of 1961-1974 d a t a . The consumption t a r g e t f o r commodity 1 is computed by

P T C ~ , ~

=

T C ~ , ~ - ~ +

cI1 *

( 1

-

e "'a)

-

(i

=

1

...

8 )

Table 2 Parameters of Demand Trend Functions

2.1.4. Module EP/4 Investment Targets

T a r g e t s f o r g r o s s a n d a g r i c u l t u r a l investment a r e s e t by using t h e exogenous p a r a m e t e r s explained u n d e r 2.1.1 a n d 2.1.2.

T a r g e t f o r g r o s s investments:

PINVt

=

PNICt

-

^PCONSL

T a r g e t f o r a g r i c u l t u r a l investments:

PINVAL

=

agL

*

PINVt T a r g e t f o r a g r i c u l t u r a l investments:

PINVNt

=

(1 - a g L )

*

PINVt

2.1.5. Module EP/Sr Setting Upper and Lower Bounds

In t h e l a s t module of EP Submodel lower a n d u p p e r bounds are set f o r produc- tion. T h e r e are two a p p r o a c h e s used in t h e model in t h i s r e s p e c t :

1 ) W e assume t h a t t h e maximal possible level of self-sufficiency in most of t h e p r o d u c t s i s a major government policy objective. The production lower and u p p e r bounds are set accordingly. In t h i s case p r o d u c t i o n Lower b o u n d s are set f o r t h e 1 0 e x c h a n g e commodities as follows:

where

ybl t h e p r e v i o u s y e a r ' s production

slb,: r e q u i r e d minimum level of self sufficiency Then, f o r

i = l , pdlbl

=

max)pdlbl, t p l l a (PTC1

+

^FEED1

+

^CINT1)I

i = 4 , pdlb4

=

max[pdlb4, tp14

*

(PTC4

+

^FEED,

+

^CINT4)I

i=5, pdlb5 = max[pdlb5, tp15

=

(PTC,

+

FEED,

+

CINT,)]

i = 7 , pdlb7

=

max[pdlb7, tp17 (PTC,

+

FEED7

+

CINT7)I i=8, pdlbg

=

(ybg

-

b7B yb7) slb,

pdlb,

=

maxfpdlb,, tpl: (TCB

+

FEEDB

+

CINTB)I w h e r e the allowed

tpl,

=

p a r a m e t e r s e x p r e s s i n g lower level of self sufficiency PTCl

=

planned t o t a l consumption

TC 1

=

a c t u a l t o t a l consumption FEEDl

=

f e e d u s a g e

CINTi

=

i n t e r n a l consumption

b 7 ~

=

b y p r o d u c t p a r a m e t e r

The u p p e r b o u n d s f i r p r o d u c t i o n are set f o r t h e 1 0 e x c h a n g e commodities as follows:

Then, f o r

i

=

2. pdub2

=

y b 2 1.025

pdub2

=

minfpdub2 , tpu2 (PTC2

+

FEED2

+

CINT2) ] 1

=

3, pdub:,

=

tpus

*

(TC,

+

^FEED,

+

^CINT,)

PTC,

i

=

6 , pdub,

=

yb6 max (1.025.

-

TC ^{6 )}

pdub,

=

max [pdub, , 1.05 (PTC,

+

CINT,) w h e r e

t p u , = p a r a m e t e r e x p r e s s i n g t h e allowed u p p e r level of self sufficiency.

All o t h e r v a r i a b l e s are t h e same as f o r production lower bounds. I t i s assumed t h a t self sufficiency requirement may v a r y in o r d e r t o utilize comparative advantages via a n extended magnitude of i n t e r n a t i o n a l t r a d e . The lower bounds f o r production are set f o r t h e 1 0 e x c h a n g e commodities as follows:

w h e r e

slb,: r e q u i r e d minimum level of self sufficiency f o r t h e i-th commodi- t i e s

Tcl,L-l: a c t u a l p r i v a t e consumption from t h e i-th commodity in t h e previ- ous y e a r

FEEDi,,-l: f e e d usage from t h i-th commodity in t h e p r e v i o u s y e a r

CINT,,t-l: i n t e r n a l consumption from t h e i-th commodity in t h e p r e v i o u s y e a r .

By changing s l b , coefficients various d e s i r e d self sufficiency levels c a n b e c o n s i d e r e d . The p r o d u c t i o n u p p e r b o u n d s are v e r y Large numbers e x p r e s s i n g no a c t u a l u p p e r limits upon production. This option h a s been used in t h e s o called F r e e T r a d e f o r CMEA/BLS Run with s l b l

=

0.6 f o r all t h e commodities.

Due t o t h e p r e s e n t f e a t u r e s of t h e Production Submodel when t h e 10-list com- modities are a g g r e g a t e d into t h e 8-list production commodities in both cases t h e bounds set f o r t h e 1 0 commodity l i s t h a v e t o b e c o n v e r t e d as follows:

Similar p r o c e d u r e i s used f o r t h e u p p e r bounds 2.2. P/Production Submodel

The Production Submodel c o n s i s t s of 9 models. Five of them are used to set p a r a m e t e r s f o r t h e modeling of a g r i c u l t u r a l and nonagricultural production. Four modules are devoted t o supply modeling.

2.2.1. Module Plr Domestic Prices

In t h e Production Submodel f i r s t t h e domestic p r i c e s are adjusted f o r t h e given p e r i o d . T h e r e are two switch-selectable methods t o determine t h e domestic p r i c e s . F i r s t w e d e t e r m i n e p r i c e s c o r r e s p o n d i n g to t h e 10-commodity l i s t .

The f i r s t method is based on t h e assumption of fixed domestic p r i c e s by using t h e p r o c e d u r e as follows:

a n d

The second method h a s been recommended by 0. Gulbrandsen. In t h i s case world m a r k e t p r i c e changes are t r a n s f e r r e d into domestic p r i c e system by using a logistic function a f t e r t h e y e a r of 1980:

PDTt(i)

=

PDt(i) (i

=

1, ..., l o ) , if y e a r l e s s or equal 1980.

PWBO(i) = PWt(i)/PWt(lO) (i

=

1 ,

...,

l o ) , if y e a r equal 1980.

If y e a r g r e a t e r t h a n 1980, t h e n

d p w ~

=

(PW(i) / (PW(10)

-

PWBO(i)) / PW80 (i) adpw,

=

min (l.abs(dpw,))

ri

=

p l / ( l + e ^{*dpwl ) -p2}

PDTt(i)

=

PDt(i)

*

^{( 1}

+

^dpw,

*

r , ) ( i = l ,

...

10)

Due t o t h e s p e c i f i c commodity classification (only 8 commodities) of agricul- t u r a l supply module (P/6), switch-selectable methods are used to determine t h e e x p e c t e d p r o d u c e r p r i c e s from domestic p r i c e s set by t h e a b o v e mentioned twu methods.

- - - - -

In case of the first method In case of the second method

(Fixed Prices) (Domestic Price Adjustment)

2.2.2. Module P/2: Population Resources The total population is computed by

POPt

=

POPL grpopt (POP,,,,

=

345710)

grpopt

=

gr2+gr3*t (gr2

=

1.00953)

(gr,

=

-0.000097) 2.2.3. Module P / 3 Labor Forces

The total labor f o r c e is a fraction of the total population shared by the parti- cipation rate:

L: =

POP^

^partt

partt

=

gr4 (gr4

=

0.502157) The agricultural labor force is:

and

A A1 A

Lt ² Lt

-

^a,, Lt w h e r e

(a,,

=

1.001) (a,,

=

0.02813) (a,,

=

0.965)

The labor force of the nonagricultural sector LFA is determined a s follows:

N A = L T - L A

Lt t t

where

t POP, Lt' Lt"

L?'

=

time v a r i a b l e , (1971

=

1 )

=

population in y e a r t [I000 persons] (1970: 345710)

=

t o t a l l a b o r f o r c e in y e a r t [I000 p e r s o n s ] (1970: -)

=

a g r i c u l t u r a l l a b o r f o r c e in y e a r t [I000 persons] (1970: 48755)

=

lower bound on a g r i c u l t u r a l l a b o r f o r c e in y e a r t [ l o 0 0 persons]

(1970: -)

=

l a b o r f o r c e of nonagricultural s e c t o r in y e a r t [ l o 0 0 persons]

(1970: -)

=

n e t national income of a g r i c u l t u r e in y e a r t

=

n e t national income of nonagricultural s e c t o r in y e a r t 2.2.4. Module P/4: Capital Stock in Agriculture

DEPA,

= 8,

CSA,

The v a r i a b l e s and t h e i r initial values in y e a r 1970:

n.c

=

UDSSR Ruble 1970

CSA,

=

c a p i t a l s t o c k employed in a g r i c u l t u r e in y e a r t [mill.n.c] (1970:

205921)

INVA,

=

a g r i c u l t u r a l investment in y e a r t [mill.n.c]

DEPA,

=

d e p r e c i a t i o n value in a g r i c u l t u r e in y e a r t [mill.n.c]

PD;

=

domestic p r i c e of nonagricultural commodity in y e a r t

I

mil1.n.c

1

I

^millUS870

81 ⁼

0.035: The (constant) d e p r e c i a t i o n rate in a g r i c u l t u r e 2.2.5. Module P/5: Fertilizer Input

Total f e r t i l i z e r input is calculated according t o t h e following function:

TF,

=

TF, f e r t t (t 'I) f e r k i s a time dependent function in t h e following form:

I I

t2 Years

The total amount of a v a i l a b l e f e r t i l i z e r 1s modified by r o u g h a g e production.

The meaning of t h e v a r i a b l e s and t h e i r initial values in y e a r 1970:

T F ~

=

t o t a l amount of f e r t i l i z e r in y e a r t [ l O O O m.t. nitrogen equivalent] (1970: TF = 7746)

TFP,

=

t o t a l amount of f e r t i l i z e r (without r o u g h a g e production in y e a r t [lOOO m.t. nitrogen equivalent] (1970: - )

YSt

=

p r o d u c e d amounts of commodities in y e a r t. (In n a t u r a l measure- ment, see commodity lists)

The meaning of t h e p a r a m e t e r :

f e r t ,

=

t h e (time dependent) growth rate of t h e f e r t i l i z e r usage The meaning of t h e c o e f f i c i e n t s and t h e i r input values:

LI _-

=

t h e f i r s t b r e a k p o i n t of t h e f e r t i l i z e r function (=I9701

t 2

=

t h e second b r e a k p o i n t of t h e f e r t i l i z e r function (=ZOO01

f 1 = minimum value of t h e growth rate of t h e f e r t i l i z e r usage (=1.035)

f 2

=

maximum value of t h e growth rate of t h e f e r t i l i z e r usage (=1.035)

2.2.6. Module P/6: Agricultural Production

The a g r i c u l t u r a l production module follows t h e e a r l i e r methodology of t h e BLS country models using a nonlinear programming model, where l i n e a r c o n s t r a i n t s are applied with a nonlinear o b j e c t i v e function. Among t h e f a c t o r s of t h e production c a p i t a l , l a b o r and f e r t i l i z e r and considered.

The a g r i c u l t u r a l production model c a n b e written f o r any y e a r t as follows.

max ma"

K L F

C

P l . Y S 1

1' I ' I l = l

s u b j e c t to:

YLBI

=

YSl

s

YUBl ( i = l ,

...,

mall)

mall

KI

s

TK

mall

C

L, S T L

ALL v a r i a b l e s and p a r a m e t e r s a l s o depend on t h e time b u t f o r simplicity w e omit t h e

"t" index.

The meaning of t h e v a r i a b l e s a r e as follows:

I n p u t v a r i a b l e s

p i

=

n e t r e v e n u e of commodity i YLBl

=

lower bounds on production YUBl

=

u p p e r bounds on production TK

=

a g r i c u l t u r a l c a p i t a l s t o c k TL

=

a g r i c u l t u r a l l a b o r f o r c e

TF

=

f e r t i l i z e r input ( e x c e p t roughage) O u t p u t v a r i a b l e s

YSi

=

n e t o u t p u t (including f e e d ) K 1

=

c a p i t a l a l l o c a t e d t o commodity i

L

i

=

l a b o r a l l o c a t e d t o commodity i

F1

=

f e r t i l i z e r a l l o c a t e d t o commodity i The meaning of t h e p a r a m e t e r s are as follows:

0 . =

81 = 1

P a r a m e t e r s of t h e Cobb-Douglas Yi

= !

t y p e production function

El

=

mc = number of "crops" in t h e commodity list mall

=

number of commodities

The module P/6 works on t h e b a s i s of 8 commodities as w a s mentioned e a r l i e r . while t h e whole model i s based on 1 0 commodities.

The commodity l i s t s in t h e CMEA model system are as follows:

1 0 Commodity List ( R e a l i z a t i o n ) Wheat Rice, milled C o a r s e g r a i n

Bovine and ovine meat Dairy p r o d u c t s

O t h e r animals

P r o t e i n food (of c r o p origin) O t h e r food

Nonfood a g r i c u l t u r e Nonagriculture

8 Commodity List (Agricultural Production) Wheat

Rlce, milled Coarse g r a i n P r o t e l n f e e d O t h e r food

Nonfood a g r i c u l t u r e Bovine and ovine O t h e r animals

2.2.7. Module P/7r Weather Effects

In t h e b a s i c v e r s i o n of t h e model n o w e a t h e r e f f e c t s upon c r o p production a r e c o n s i d e r e d . However, t h e a c t u a l production computed by module P / 6 f o r wheat (commodity 1 ) and f o r coarse g r a i n (commodity 3 ) c a n b e independently p e r t u r b e d by a random w e a t h e r e f f e c t using t h e followlng distributlon:

Table 3. Weather Random Effects on Crops P r o b a b i l i t y Z of c h a n g e

of t o t a l production

2.2.8. Module P/9* Non-&ricultural Production

The n o n a g r i c u l t u r a l production. Y B , i s calculated by t h e following function:

't

(Lt~]l-tr

YBnVt = pn3

*

^CSNt

and

*Module P/8 d o e s n o t exist i n t h i s v e r s l o n . T h i s module is numbered P/9 t o be c o n s i s t e n t w i t h e a r l i e r v e r s i o n s o f t h e model.

where

pn, (= 0.728) pn2 (= 0.4183)

png ⁽⁼ 0.5461) are estimated p a r a m e t e r s

CSNt: c a p i t a l stock employed in nonagriculture in y e a r t (1970 = 1527677)

L : ~ :

l a b o r f o r c e of nonagricultural sector in y e a r 1 (1970

=

122164) 2.3.

R-

R e a l i z a t i o n

2.3.1. M o d u l e R/1: World Market Prices

The 10-commodity world m a r k e t p r i c e s are t a k e n from t h e international e x c h a n g e module of t h e BLS and influence domestic p r i c e s according t o module P / 1 .

2.3.2. M o d u l e R/2: E x c h a n g e

Module R/2 is a c r u c i a l p a r t of t h e whole model, where t h e final Level of p r i v a t e and government consumption as well as s t o c k s satisfying balance of t r a d e equilibrium conditions are determined. I t is v e r y important to underline t h a t t h e r e a c t i o n mechanism of domestic demands t o new world market conditions ( p r i c e s ) i s d e s c r i b e d h e r e .

In t h i s module t h e so-called noncommitted demands, which c a n b e t h e s u b j e c t s of f u r t h e r adjustment, are determined. The noncommitted demand f o r a specific commodity consists of various elements; t h e r e f o r e , Let q,,, e x p r e s s t h e hth t y p e of demand f o r commodity i. To r e a c h a solution f i r s t w e define a t a r g e t level of t h e hth demand f o r commodity i(qlf)) and introduce a v e c t o r A which indicates t h e e x t e n t t o which t h e t a r g e t s are realized. Obviously t h e realization levels are con- s t r a i n e d between two bounds:

Let u s assume t h a t y is t h e v e c t o r of supply a f t e r t h e deduction of committed e x p e n d i t u r e s is t h e world market p r i c e of commodity i , and k i s t h e prelim- i n a r y fixed balance of foreign t r a d e .

The solution of module R/2 is equal to t h e determination of t h e values of vec- t o r A which satisfy

with

a n d w h e r e Q is a matrix of noncommitted demands

During t h e solution p r o c e d u r e a s t r i c t p r e f e r e n c e o r d e r i n g of various types of demands i s followed:

1. ds,, 2. ds,, 3. PlNVN 4. PINVA

5. PTC,, 6. PTC,, 7. CINT,,

In t h e e v e n t of c h a n g e s in t h e world m a r k e t p r i c e s a new A v e c t o r h a s t o b e calcu- l a t e d . lf no solution c a n b e obtained, t h e A* a n d A** v e c t o r s h a v e t o b e a d j u s t e d so t h a t a solution can b e r e a c h e d . The calculation of v e c t o r A i s easily programmed.

I t i s worthwhile to c o n s i d e r unity as a n initial value of hi. I t is obvious t h a t in t h e e v e n t t h a t t h e t a r g e t i s r e a l i z e d , Ai=l, a n d always A;

<

1 a n d A;* ² 1.

The t a r g e t values of noncommitted demands are determined as follows.

-

A s f a r as s t o c k s are c o n s i d e r e d , so-called optimal s t o c k s are t a k e n as t a r g e t values. These optimal s t o c k s are computed by:

dsl

=

O.l*PTCi ( i = l ,

...

9) a n d dslo

=

0.025*PTCn.

-

A s t h e t a r g e t value of d i r e c t government investments in food a n d agricul- t u r e t h e value of PINVA (planned investments in food a n d a g r i c u l t u r e ) , as determined in module E P / 2 i s used. The t a r g e t value o f INVN (planned investment of t h e rest of t h e economy) c a l c u l a t e d b a s e d on t h e value o f PINVA determined In module EP/2.

-

The t a r g e t s on consumption P T C ~ ( ~ ) are computed In E P / 3 module

-

A s t a r g e t s o n p r i v a t e consumption, t h e values of T C ~ ( ~ ) r e l a t e d t o consu- m e r p r i c e f o r t h e given y e a r a n d endowments c a l c u l a t e d in module E P / 3 determined by t h e nonlinear demand system are used.

A. and A=' e x p r e s s t h e e x t e n t of allowed deviation from t a r g e t levels. F o r t h e v a r i o u s elements of Q d i f f e r e n t A* a n d A** values are glven, e x p r e s s i n g t h e government o b j e c t i v e s a n d policies in demand of adjustment. Vector A i s d e t e r - mined using t h e algorithm mentioned a b o v e a n d t h e final values of v a r i a b l e s included in matrix Q c a n b e c a l c u l a t e d . On t h e basis of t h e elements of t h e Q matrix t h e e x p o r t - i m p o r t v e c t o r i s calculated:

EI f t )

=

C q l l ( t )

-

^('-)

1 yi

tP

E1jt)

s

0 t h e n

1 8 ~ ) ⁼

- E I ~ ( ~ ) a n d E$'-)

=

⁰

tP

E l f t ) 2: 0 t h e n E f t )

=

El{'-) and 1

f t ) =

0

tP

E I ~ ( ~ )

=

0 t h e n E f t )

=

0 a n d

=

0

The final values of government investment INVA'- a n d I N V N ~ are a l s o calcu- l a t e d . Based on t h e l a t t e r information t h e investment p r o g r a m of t h e given y e a r i s f inallzed.

REFERENCES

Csaki. C. (1981). A National Policy Model f o r t h e Hungarian Food a n d Agriculture S e c t o r . RR-81-23: I n t e r n a t i o n a l I n s t i t u t e f o r Applied Systems Analysis. Lax- e n b u r g , Austria.

Csaki, C. (1982). Long-Term P r o s p e c t s for A g r i c u l t u r a l Development i n t h e E u r o - p e a n CMEA C o u n t r i e s , including t h e S o v i e t Union. RR-02-25: l n t e r n a t i o n a l I n s t i t u t e f o r Applied S y s t e m s Analysis, L a x e n b u r g , A u s t r i a .

Csaki, C. (1985). S y s t e m S i m u l a t i o n a n d S y s t e m s A n a l y s i s i n A g r i c u l t u r e . E l s e v i e r , Holland.

Food a n d A g r i c u l t u r e O r g a n i z a t i o n (FAO). (1981). A g r i c u l t u r e Toward 2000. Rome.

I t a l y .

F i s c h e r . G.. a n d K . F r o h b e r g (1981). Simplified National Models: T h e Condensed V e r s i o n of t h e Food a n d A g r l c u l t u r e Model S y s t e m of t h e I n t e r n a t i o n a l lnsti- t u t e f o r Applied S y s t e m s Analysis. WP-80-56: IIASA. L a x e n b u r g . A u s t r i a . K e y z e r , M. (1981). T h e I n t e r n a t i o n a l L i n k a g e of Open E x c h a n g e Economies. Doc-

t o r a l D i s s e r t a t i o n . F r e e U n i v e r s i t y . Amsterdam. 1981.