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Module 7100
Implementation and Interpretation of Policy Scenarios in Partial Equilibrium Models of the Agricultural Sector

Instructors

Objectives

Students will

Course Description

Course attendants will mainly analyze in group work based on a Graphical User Interface (GUI) the results of counterfactual runs both with ESIM and CAPRI against a medium term baseline (2020). The GUI and model results are identical to those used in real-world production runs with the models, allowing the students to experience the touch-and-feel of policy relevant quantitative impact assessment with economic simulation models. Typical challenges compared to didactic models used in classes at master levels are a high disaggregation with regard to products and regions as well as a detailed presentation of policy instruments close to the law book.
The counterfactuals are to a large degree harmonized such as to allow for comparisons of differences between results obtained with ESIM and CAPRI, to let students critically reflect on how e.g. model structure and resolution impact results. The scenario runs will refer to topics relating to current policy and market developments relevant for EU agricultural markets (e.g. CAP reforms, bio-fuels, dietary changes). Knowledge about GAMS, the Algebraic Modeling Language used for CAPRI and ESIM, is not required.
For each scenario block, students will receive beforehand compulsory reading assignments along with key questions which relate to the topics analyzed. Before the actual analysis of model results with regard to a specific topic starts, the students will present for 15-20 minutes their findings from these compulsory readings based on slides and discuss them with the whole group. Afterwards, the students will in small groups (3-4) develop a mind map of expected changes (at least directions, for production and demand quantities, net trade, prices …) under the analyzed scenario. The expected changes will be discussed afterwards in the whole group. The trainers will give feedback on these argumentation lines, especially with regard to application of clear behavioral and other economic assumptions, e.g. with regard to market structure.
After that preparatory step, the following analysis of the model results will be done in small groups. The groups will work in parallel and have 1-2 hours to develop a short presentation with the key answers to these questions. The presentation should include results in tabular or graphical format. Each group will afterwards present and discuss its findings with all participants. Lecturers will correct obvious errors and discuss omitted viewpoints. Lecturers are also available in the class room during group work to help with technical problems or to answer questions relating to the economic simulation models.
Based on the results from the first round of analysis, the lecturers will assign a second round of rather targeted, small assignments to deepen the analysis or widen it, respectively, to aspects not yet touched by the students (e.g. welfare analysis, environmental impacts, impacts on rest-of-the-world). These findings will be presented based on slides to the whole group.

Course Outline

Date

 

Content

Before the course

About 2-3 days

Scan model documentations for ESIM and CAPRI, read background material on effects of abolishment of direct payments, a reduction in EU meat consumption and increases in EU biofuel demand. Carry out assignments (prepare a 10 minutes presentation on your topic of choice; see below)

Monday

13.00-15.00

Plenary: Introduction, presentation of assignments on the abolishment of direct payments, formation of groups

 

15.30-16.15

Group work: discussion on how to implement policy scenarios on abolishment of DP and on anticipated results

 

16.15-17.00

Plenary: Presentation and discussion of approach and anticipated results by ESIM and CAPRI group

 

17.00-18.00

Start of group work: scanning existing model results of abolishment of direct payments and preparing a presentation on results

Tuesday

08.30-09.30

Continuation of group work: scanning existing model results of abolishment of direct payments and preparing a presentation on results.

 

10.00-11.00

Plenary: presentation and discussion of ESIM and CAPRI results

 

11.00-13.00

Work on additional assignments regarding the direct payment scenarios

 

14.30-16.30

Plenary: Discussion of results of additional assignments.

 

16.00-17.30

Presentation of assignments regarding biofuels.

Wednesday

 

Same on biofuels and on animal welfare (two groups in parallel)

Thursday

 

Special topic (to be decided with students): Either Simulation of Brexit with a global CGE model or TTIP simulated with CAPRI

Friday

8.00-12.00

Open ends?

 

12.00-14.00

Exams (voluntary; 15 minutes per person)

Teaching methods

Lectures (20%), student presentations (20%), PC-demonstrations (10%), hands-on-exercises (50%)

Grading (if desired)

Presentations (30%), assignments (30%), oral exam (40%)

Credit points

3

Workload: 40 contact hours during the course; 40 hours of pre- and during course self-study)

Requirements

Students need to bring a notebook on which software and data files will be installed!

Microeconomics at an intermediate level, linear programming. An introduction to simulation modeling in GAMS is helpful, but not required.

References (optional background reading)

References (mandatory background reading)

Information on CAPRI and ESIM:

On abolishment of direct payments:

On biofuels:

On biogas:

On higher cost being caused by animal welfare standards and effects on markets:

On other topics:

Assignments

  1. What drives the results of an abolishment of direct payments in different economic simulation models? Based on Balkhausen et al., 2008.
  2. Discuss the interaction between the land market, the SPS entitlements and increased land demand due to urbanization based on Britz et al. 2012.
  3. What are the effects of increasing demand for biofuels on animal production? Based on Banse and Grethe, 2008b, and on Blanco Fonseca et al., 2010.
  4. What is the effect of increasing biofuel demand in the EU on net agricultural trade? Based on Grethe et al., 2013, and on Blanco Fonseca et al., 2010.
  5. Why will ESIM typically show stronger net trade effects than CAPRI based on the same shocks (based on model documentations)?
  6. Why do similar biofuel scenarios have a stronger effect on EU vegetable oil and oilseed prices in typical CGE models than in ESIM? Based on Banse and Grethe, 2008a and on van Kuipers and van Tongeren, 2006.
  7. What are the main reasons in Britz and Hertel 2011 to combine CGE and PE models for the analysis of bio-fuel mandates?
  8. Do the CAPRI supply models exhibit constant return to scale? Are hey homogenous of degree zero in prices? Discuss based on the model documentation.
  9. On the role of economic models in policy design; Pick and explain the ten most important points from the two following conference presentations, and select one application with regard to the question “Do results matter” where you read the paper and where you present key results on a few slides:
    1. Britz, W., Witzke, H.-P. (2013): Use of economic modelling in agricultural policy, selected paper presented at the 6th DAES Conference "Tools for Decision Support in Agriculture and Rural Development", April 18 - 19, 2013, Krsko (Slovenija): http://www.ilr.uni-bonn.de/agpo/publ/present/Britz_Witzke_2013_01.pdf
    2. Britz, W., Heckelei, T. (2013): Modelling tools for policy Analysis: dimensions of reliability, invited paper presented at the 133rd EAAE-Seminar, June 14-15, 2013, Chania (Greece); http://www.ilr.uni-bonn.de/agpo/publ/present/Britz_Heckelei_2013_01.pdf
  10. On the communication of model results to the public; What is the background of this one (in German); are models so different? http://www.topagrar.com/news/Energie-Energienews-Biosprit-Wo-liegt-die-Wahrheit-1312210.html
  11. On the communication of model results to the public; Are they really talking about the same study (all in German)?
    1. Interpretation 1: http://www.schweine.net/news/fleischverzicht-haette-kaum-auswirkungen-auf-weltw.html
    2. https://www.google.de/url?sa=t&rct=j&q=&esrc=s&source=web&cd=1&ved=0ahUKEwjI3b_UoYzPAhUIrxoKHeBnAAQQFggeMAA&url=https%3A%2F%2Fwww.uni-goettingen.de%2Fde%2F0072013-weniger-fleisch---60--der-deutschen-zeigen-bereitschaft-dazu%2F436481.html&usg=AFQjCNGZlAjHZL1RIoa4Jt_WYVAXgThQzw&cad=rja
    3. The original study: https://www.rentenbank.de/dokumente/Schriftenreihe_Band29_final.pdf
  12. Would we need to model green box policies in order to assess the level of trade distortion caused by agricultural policies in the EU? Based on Mittenzwei et al. (2013).
  13. What area allocation effects of biogas production in Germany and spillover effects on other countries? Based on Britz and Delzeit (2013).
  14. How to model the effects of increasing animal welfare legislation on EU market balances of animal products? Based on Grethe (2007) and WBA (2015) as "background articles". Scan the literature yourself to look for any empirical studies.

Software

GGIG (Graphical User Interface Generator), used with CAPRI, ESIM and GTAPInGAMS, alternatively GAMS GDX Viewer or GTREE

Language

English

Organization and time

This is a one week, full day blocked course.