Files
Abstract
As agricultural policy reform and its effects have become increasingly territorialised, analyses
which attempt to explain or predict impacts need to be more localised but also identify spillover
effects. In addition to the predictions of policy shocks predicted by sectoral partial
equilibrium models, local and regional general equilibrium approaches which establish the
wider effects of such policy shocks have become popular. However, these neglect a major,
underexplored difficulty: agriculture is usually described as a single sector in input-output
accounts, whereas policy shocks with differential impacts have effects on other industries which
are different to those implied by average input-output coefficients. Regionalisation of
aggregated input-output tables adds further to these difficulties. The objective of this paper is to
develop a relatively simple method for dealing with these problems. It establishes the
theoretical basis for aggregation bias and shows how it can be measured, in two contrasting
case study regions in the United Kingdom and Sweden. Having established that this is a
significant problem, a simple but effective procedure is demonstrated, based on additional
information on variable costs, which transforms policy shocks from a direct change in
agricultural output to that transmitted to the suppliers of inputs. This method provides an
impact close to that which could be calculated if the general equilibrium system had indeed
been disaggregated, and supports use of this approach in impact studies where the researcher
does not have the time or funding available for completely disaggregating the agricultural
sector’s regional accounts.