2120 final report.pdf - Agra CEAS Consulting

THE SOCIO-ECONOMIC IMPLICATIONS OF THE VARIOUS SYSTEMS TO KEEP LAYING HENSFor the purposes of this study, we report results for a number of policy experiments that take theform of an exogenous variable change. In line with the scenarios agreed with the Steering Group forthis study, the results reported on are as follows: producer, consumer and total surplus changes measured in Euros (2003);changes in the volume of egg production (shell caged, shell alternative and processed) measuredin per cent 34 .The analysis we conduct with the model is to make a change in one of the exogenous demand orsupply shift parameters. Our measures of welfare change take account of situations when there aremore than two sources of general equilibrium feedback i.e. close substitutes in demand. For all otherdemand and supply situations the measurement of economic surplus is straightforward 35 .7.1.2. Data parameters and elasticitiesTo solve the EDM three sets of information were used. These were:1. Base equilibrium prices and quantities for all sectors and markets;2. Market parameters that describe producer and consumer responses to any price change; and,3. The value of exogenous variables (e.g. tariff or input cost changes) that quantify the shocks.Base equilibrium prices and quantities have been obtained from existing EU data sources as well asStage 1 of this research. The various market parameters required to make the model operational,such as elasticities, have been derived as a result of an extensive review of the literature as well astaking account of industry opinion that emerged as part of the project. In this context it is to benoted that some of the elasticities needed to solve the model do not emerge as a result ofeconometric estimation but rather the analysts' feel for what is appropriate. In this case what haspreviously been used in the EDM literature has been considered. We would also note that thedesire for a model that describes an industry supply chain will almost always mean that many of thekey parameters have not been estimated statistically. This is a limitation of EDMs but even more soof Classical General Equilibrium (CGE) models or any other type of detailed simulation model.Finally, the model has been devised in such a way that all exogenous variables allow us to examinethe relevant policy scenarios.34 As for existing EDMs we accept the proposition that change in economic surplus is measured off Marshallian demand and supply curves.Furthermore, as only relatively small shifts in demand or supply curves are examined it is the trapezoid area of welfare change that ismeasured and as such the errors from using changes in surplus to approximate changes in Hicksian welfare are relatively small (Zhao, et al,2003).35 Our estimates of producer/consumer and total surplus are only approximations of welfare changes because we have employedMarshallian and not Hicks compensated demand curves. We have, however, conducted the necessary theoretical testing on the model toensure that our surplus measures are a good approximation. For more technical detail on these issues see La France (1991) and Thurman(1991) and Zhao et al. (1999).90