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BackgroundInteractions between agriculture and processing industries came into focus of researchers. Many of the widely used modelling systems and databases do not support such studies in the desirable detail. IPTS launched on request of DG TRADE an in-house project on the compilation of Social Accounting Matrices with a detailed representation of the agricultural sector (AgroSAM). This project combines agricultural sector data from an existing partial equilibrium model (CAPRI) with economy-wide supply and use tables provided by Eurostat.

Research ObjectiveThe main aims of this project are: to construct Social Accounting Matrices (SAMs) for the EU27 Member States which would allow analysing the economic effects of the CAP reform within and beyond agriculture. to contribute to existing tools for quantitative policy analysis that are built on SAMs, like computable general equilibrium models (CGE). to provide a data-link between agricultural sector models and multi-sector models

Datasets Used• Supply and use tables (SUT) and input output tables (IOT) from Eurostat – 59 sectors• Macro aggregates from Eurostat (NAMA) - 31 sectors• National accounts by institutional sectors (NASA) • CAPRI Database – 60 sectors

Main Challenges• While the agricultural sector is well documented, data about agricultural processing industries proved to be more difficult to obtain• SUTs are available for 24 EU Member States only• The year 2001 has the best data coverage; more recent years are not as well covered• The large number of variables underlying the AgroSAMs causes computational difficulties (compilation time)

From Partial Equilibrium to General Equilibrium Models

Linking of Databases by Means of Entropy Techniques

ContactDr. Marc Müller and Dr. Ignacio Pérez DomínguezEuropean Commission • Joint Research CentreInstitute for Prospective Technological StudiesTel. +34 954488348 • Fax +34 954488434E-mail: marc.mueller@ec.europa.eu

Model Flow:(1) Construction of SAMs in ESA95 Format

(2) Compilation of Priors for the AgroSAMs based on the CAPRI Database

(3) Balancing the AgroSAMs

Results:As final result, a set of balanced agricultural social accounting matrices (AgroSAMs) consistent with national supply and use tables is provided. They give a more detailed picture of the agricultural sector according to the information derived from the highly disaggregated CAPRI database. Currently the data available allow the construction of AgroSAMs for 24 EU Member States for the year 2001. The extension to 27 Member States and a more recent year is in preparation.

Use:AgroSAMs can be used as database for a variety of modelling systems currently used by analysts within European Commission: SAMs and corresponding input-output tables serve as standard format for general equilibrium models like GLOBE or GTAP (Global Trade Analysis Project), which is used for instance by DG-TRADE. Partial modelling systems (like CAPRI) which rely on sector-specific data will also benefit from the usage of the AgroSAMs because of the implicit macro-economic consistency of any derived sub-set.

1 min lns s ss

CE W W W Cross Entropy Minimand

s.t. 2 Y Y Final AgroSAM entry Y equals prior information

Y times correction factor kappa κ 3

exp s ss

W b

Kappa is defined as exponential function of bounds b and associated weights W

4 3, 1.5,0,1.5,3sb SIG Bounds b are defined as symmetric interval centred at 0; range of the interval depends on exogenously set standard deviation SIG

5 1; 0 1s ss

W W Weights W have to add up to 1 and range between 0 and 1

6 accounting identities for Y Totals of rows and columns in the AgroSAM have to be equal; associated quantities also have to be balanced

E x p e n d i t u r e s

Activities Commodities Factors

Transactions

Institutions Total

Agriculture

Industry Activities

Services

Domestic production

Agriculture

Industry Commodities

Services

Intermediate demand

Domestic consumption

Exports

Labour Factors

Capital

Payments for fixed factors

Income from abroad

Trade Trade margins Transactions

Taxes Taxes on activities

Taxes on commodities

Direct taxes

Enterprises

Households

Government

Savings-Investment

Savings

R e v e n u e s

Institutions

Rest of the world

Imports

Distribution of factor

income

Transfers

Total

• Supply-tables (purple) and Use-tables (blue) were combined with data on flows between domestic institutions (NASA, green)• Agriculture is represented only as one row and one column

• Aggregate values for agriculture from CAPRI (purple) and ESA95 (blue) deviate in some cases substantially• Need to formulate a balancing procedure to adjust agricultural data to macro-total indicated by ESA95

• Cross-entropy procedure• Final AgroSAM entry is defined as prior information times a correction factor

• Deviation from prior information depends on exogenously set standard deviation (“SIG” in left figure)• Accounting identities are imposed on all entries of the AgroSAM

0 5000 10000 15000 20000 25000 30000 35000 40000 45000 50000

Intermediate demandby activities

Gross value added atbasic prices

Activity level

Domestic marketedproduction

Imports

Exports

Million Euro, current

CAPRI

ESA95