1 A Recursive Dynamic Computable General Equilibrium Model For ...

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status quo scenario where the export subsidy is not eliminated, it is necessary to enforce the Spanish UR export commitments, whilst allowing for stock purchases. Figure 12 presents a simplified partial equilibrium analysis of the UR export subsidy and quantity relationships. It is assumed that the domestic market price, Pm is fixed, which implies that the export subsidy expenditure function, in the lower part of the figure, is positive even at the free trade export quantity (Qf). <strong>For</strong> the sake of argument, assume that the export quantity binding limit is Q o , whilst the subsidy expenditure limit is E1, then it is the quantity binding limit which is binding. Thus, the export quantity cannot exceed Q o , whilst the export subsidy expenditure will only increase if the per unit export subsidy rate was exogenously increased (i.e., XS shifts to the left). In terms of the model code, it is necessary to specify the following complementarity: COMPLEMENTARITY (Variable = V4TAX, Lower_Bound = 0, Upper_Bound = V4LIMIT) (16) E_EXPSUB (all,c,EXPSET)(all,s,XROW) X4(c,s) - X4LIMIT(c,s) ; In policy terms, this equation states that there are two limits to adhere to for the variable V4TAX (i.e., the export subsidy). The lower bound is zero, and the upper bound is the UR agreed limit set by the variable, V4LIMIT. The variable X4 is the export quantity, whilst X4LIMIT is the UR agreed export quantity constraint. Thus, if the export subsidy equals V4LIMIT, then the expression X4 – X4LIMIT must be less than zero (i.e., export quantity is below or equal to the ceiling limit). If the export subsidy is greater than zero but less than V4LIMIT, then the expression X4 – X4LIMIT must be zero (i.e., export quantity is equal to the ceiling limit - binding). If the export subsidy is zero, then the export quantity is greater than or equal to the UR limit. 23 Thus, if the export subsidy expenditure is binding, the quantity constraint is less than or equal to the binding limit. If the quantity constraint is binding, then the export subsidy is less than or equal to the limit. 24 23 In practise, this state never occurs, since if we wanted to eliminate the export subsidy, we would simply apply an exogenous shock. 24 The downside of this treatment is that it doesn’t deal with a scenario when neither is binding. One, or the other, or both must be binding. Consequently, when focusing on the UR export subsidy constraints it is useful to run a prior simulation in order to ascertain whether any specific export commodities (on non´-EU routes) do not violate either restriction. If this is so, then a complementarity is not modelled for that commodity. 30
Price Pm Pfob Expenditure E1 E0 Q min Q f Q 0 Exports Figure 12: UR Export Constraints for EU countries: A Partial <strong>Equilibrium</strong> Analysis In the ORANI-DYN model, the export subsidy rate (expt4) for non-EU exports is endogenised to pair off with the COMPLEMENTARITY equation and ensure closure. Note that the per unit subsidy is the difference between the ‘basic’ (i.e., domestic presubsidy) non-EU export price (pe) and the non-EU export f.o.b. world price (p4). In the model, the domestic commodity price (which is the internal market price), p0com, is a weighted average of the domestic sales price (p0dom) and the composite basic export price (pe_c). There are two components to intervention prices: The first is to model the stock purchase trigger; the second is to model the reduction in effective protection to EU producers from the price reduction. On the first modelling issue, stock purchases are captured employing a separate COMPLEMENTARITY expression: 31 XS XD Exports XE
Page 1 and 2: A Recursive Dynamic Computable Gene
Page 3 and 4: Figure 5: The Private consumption n
Page 5 and 6: which the commodity is purchased. I
Page 7 and 8: 1.1.2 Private Final Demand In ORANI
Page 9 and 10: capital goods in industry ‘i’ i
Page 11 and 12: nesting to incorporate energy deman
Page 13 and 14: Note, that the values of the capita
Page 15 and 16: disposable income grouping. 11 Once
Page 17 and 18: equal for each using industry ‘i
Page 19 and 20: modelled as sector-wide output cons
Page 21 and 22: Spain on (i) the biophysical charac
Page 23 and 24: the crops for which data on ‘gros
Page 25 and 26: ⎡ B ⎤ AREA = 1 − ⎢ ρ ⎣C
Page 27 and 28: qo(i,r) q1lnd(FCP) q1lnd(other agri
Page 29: Given that set-aside is mainly comp
Page 33 and 34: household income is simply the addi
Page 35 and 36: G t = I/K (22) Relating changes in
Page 37 and 38: An additional extension of this dyn
Page 39 and 40: pick up) rather than a long term st
Page 41 and 42: A proportional link between househo
Page 43 and 44: (TRANSFER(“spend”)), less socia
Page 45 and 46: downward (negative) shock in the ex
Page 47 and 48: the data base and model structure a
Page 49 and 50: Harrison, W. J., and K. R. Pearson
Page 51 and 52: Appendix A: Nesting The choice of f
Page 53 and 54: The second condition is that the ag
Page 55 and 56: Appendix B: A Linearised representa
Page 57 and 58: Note that the absence of any price
Page 59 and 60: Rearrange (B14) in terms of v i,j,k
Page 61 and 62: t n ⎡ = y j, k − ⎢ f n, j, k

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