AN ECONOMETRIC APPROACH FOR INTERSECTORAL ANALYSIS OF ALTERNATIVE POLICIES IN U.S. AGRICULTURE (MODELING, POLICY; UNITED STATES

One of the most important issues in agricultural policy is how an impact on one sector will be distributed to other sectors in the short run as well as in the long run. The FAPSIM (Food and Agricultural Policy Simulator) model developed by ERS/USDA and modified in this study were used to analyze the impacts of changes in selected policies and exogenous shocks on different sectors in U.S. agriculture.;All ending stock and marketing margin equations in the original model were reestimated not only to increase the validity of whole system, but also to explain the dynamic interactions between production and consumption sectors more explicitly since both equations are thought as essential to find linkage effects.;For simulation analysis, changes in two agricultural programs and one exogenous shock were introduced: (1) Price support program in the crop sector--a 10 percent increase in the target price and loan rate of wheat and of corn was assumed throughout the simulation period. (2) Dairy price support program--a constant ratio of support price for non-fat dry milk to feed costs was assumed throughout the simulation period. (3) Grain exports increase--a 20 percent increase in corn and soybean exports in the 1980 crop year was assumed.;Based on the modified FAPSIM model, the impacts of the above scenarios were estimated for the period of 1980-1987. Major findings from these were as follows: (1) Continuous change in the crop sector has longer term impacts on other crops than does that of a one-time shock. (2) The impacts of policy changes or exogenous shocks on the livestock sector of longer duration than are those in the crop sectors. (3) Even a one-time shock such as a corn export increases causes relatively long-term ripples in the livestock sector. (4) An increase in the corn target price and loan rate is one way to reduce dairy surpluses albeit a fairly costly one to consumers.