WHY THE POOR CARE ABOUT PARTIAL VERSUS GENERAL EQUILIBRIUM EFFECTS - PART 1, METHODOLOGY AND COUNTRY CASE
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The paper compares the effects of productivity growth in agriculture in a standard
CGE model and an adjusted CGE model with special features in order to replicate
partial equilibrium behavior of traded agricultural sectors within a general equilibrium
framework. The fixed-price, partial equilibrium CGE model shows a strong multiplier
effect so that total GDP, factor earnings, and household incomes increase with the
productivity growth in agriculture. In comparison, the standard CGE model generates
much more diverse sectoral behavior, stronger trade through shifts in the exchange
rate, and a less equitable income distribution among farm and non-farm households.