CoPS/IMPACT Working Paper Number OP-65

Title: Modelling the Effects on Australia of Interventions in World Agricultural Trade

Authors: Mark Horridge and David Pearce


In this paper we desribe a general equilibrium model of the world economy, designed to simulate the effect of a liberalization of world food trade. Our model owes much to Tyers (1985) partial equilibrium model which covered trade between 30 countries in 7 agricultural commodities. It also displays several important differences. First, ours is a general equilibrium model. We argue that the general equilibrium approach makes key assumptions explicit, and can be used to restrict uncertain parameter values. Second, we have adopted a comparative static framework, and have expressed our equations in percentage change form. Third, we have updated and revised most of the data used by Tyers. Last, our methodology allows us to include the ORANI model of the Australian economy as an integral part of the world model. This allows a detailed picture of the effects of world food trade liberalization on Australia. At the same time the ORANI results are completely consistent with those yielded by the world model.

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JEL classification: C68, D58, E27, F13, F15, Q17.

Keywords: world food trade, comparative-static simulation, computable general equilibrium model, model linking.

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