To Trade or Not to Trade? Non-Separable Farm Household Models in Partial and General Equilibrium

Hans Lofgren, Sherman Robinson, Hans Lofgren, Sherman Robinson
1999 unpublished
Empirical evidence and microeconomic theory suggest that, in many settings, farm household production and consumption decisions are "non-separable." Non-separability may have important policy implications, including lack of response or threshold effects when incentives change. This paper extends the literature in two ways. First, we develop a non-separable farm household model with transaction costs and endogenous choice of market "regime" (surplus, self-sufficiency, or deficit) for
more » ... it) for production-consumption items (commodities and factors that are both demanded and supplied by the household). Second, we embed this household model in an economy-wide computable general equilibrium model which is formulated as a mixed-complementarity problem. Simulations with a model based on data for a stylized, low-income, Sub-Saharan African country show that the proposed formulation enhances our ability to analyze the impact of exogenous changes on African farmers.
doi:10.22004/ag.econ.97557 fatcat:toinow3v6fftjnygisii6tp6di