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Constructing a SAM for Ireland

Constructing a SAM for Ireland. Ana Corina Miller Trinity College Dublin. Research Questions. 1.Trade liberalization impacts WTO agricultural trade policy reforms – Doha Round 2.Further reform of the CAP 3.Climate change ( Carbon levy )

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Constructing a SAM for Ireland

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  1. Constructing a SAM for Ireland Ana Corina Miller Trinity College Dublin

  2. Research Questions 1.Trade liberalization impacts WTO agricultural trade policy reforms – Doha Round 2.Further reform of the CAP 3.Climate change (Carbon levy) 4.Bio-fuels production impacts on land-use and cereal prices Capture the distributional effects on farm/non-farm households of different food related shocks on the economy Discuss the construction of the tool box

  3. Methodology and Plan of Work Constructing a CGE model of the Irish economy with a detailed representation of the Irish agri-food sector and to link it to a Microsimulation model Steps: • Building a Social Accounting Matrix (SAM) • Building the Computable General Equilibrium Model (CGE) • MS – “building” and linking a Microsimulation model to the CGE • Simulations

  4. What’s a SAM? Main data structure underlying a CGE Model An internally consistent accounting framework A snapshot of the economy at a certain time Used to calibrate the CGE model to the base year data by determining key parameters Construction closely related to the modelling framework and policy questions

  5. Why a new SAM ? • Make use of the new I/O table 2005 • Use the NFS 2005 instead of Capri estimation for the agricultural sub-matrix • Facilitate the link the Agro SAM with the NFS at micro level • The farm households in the HBS 2005 overlap with those in the NFS 2005

  6. Steps in constructing a SAM for Ireland • MACRO Social Accounting Matrix (SAM) • Complete but unbalanced AGRO SAM • MICRO SAM • Balance SAM

  7. Basic Social Accounting Matrix (SAM)

  8. MACRO SAM • Accounts • 55 Activities producing 55 Commodities • 2 Factors of production –Labour and Capital • 3 Institutions – Households, Government and Enterprises • 3 External Account – UK, REU and ROW • 1 Tax account • 1 Savings/Investments account MACRO SAM – 65 Square Balanced Matrix.

  9. Main Source of Data for SAM • National Accounts System (CSO2009) • 2005 Input-Output Table (CSO2009) • Annual Accounts by Current Account (AACA) (CSO2009) • Annual Review and Outlook for Agriculture and Food (AROAF) (Department of Agriculture and Food 2007), • Household Budget Survey 2004 –2005 (CSO2005) • Statistical Year Book of Ireland (SYB2008) • Marketing Margins rate derived from the 2005I/O Table • National Farm Survey 2005 (NFS2005)

  10. Ireland MACRO SAM Balanced

  11. AGRO SAM • Agricultural, Hunting and Related Services – 12 sectors producing 13 commodities • Manufacture of Food and Beverages – 10 sectors producing 10 commodities • Factors of Production – Labour, Capital, Land • Taxes – Tax on production, Taxes on products, VAT, Income/Corporate Tax and Import Duties • Subsidies • Trade and Transport Margins • Export Refunds AGRO SAM – 171 Square Balanced Matrix

  12. AGRO SAM • OIIA 2009 identifies 18 types of commodities: Cattle, Pigs, Sheep, Horses, Poultry, Milk, Other Products, Barley, Wheat, Oats, Potatoes, Sugar Beet, Mushrooms, Other Fresh Vegetables, Fresh Fruit, Turf, Other Crops and Forage Plants -----12 industries used in the SAM • Output Matrix

  13. AGRO SAM Intermediate Consumption Matrix • Data source OIIA2006 – 11 consumption factors • Supply Balance Table (CSo2009) • Use NFS2005 to calculate, for each type of farm, the shares of intermediate goods used in the farm

  14. AGRO SAM Factor of Production – Land • NFS2005 – shares of farm livestock

  15. AGRO SAM • Factors of production – Labour- for each farm is calculated the share of labour using the standard man day (SMD) variable. • Factor of production – Capital is allocated across the 12 new agricultural sectors according to the capital depreciation variable reported in NFS2005 • A control tool in disaggregating the value added was Henry estimates – approximately 50% is attributed to the labour input, 30% to capital and the remaining 20% to land

  16. Further work Treatment of land – wide use, limited use and very limited use (forestry) Treatment of farm households - possible disaggregation: dairying, dairying & other, cattle rearing, cattle & other, mainly sheep, mainly tillage Integration of CAP policy instruments Labour supply would be elastic and mobile

  17. Macro-Micro Link The basic problem encountered is how to link the microdata from the HBS/NFS surveys to the CGE model. – Integration approach, Cockburn (2001) Reconcile the survey data with the accounts in the SAM The SAM is rebalanced – Cross Entropy Method (Robilliard and Robinson, 2003) The farm /non-farm households’ behaviour is represented by LES function and the differences in marginal shares of goods consumption determines the response that household takes

  18. Thank you

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