Farm Economics

In a recent article published in the Journal of Economic Systems Research, Mary et al. (2018) introduced an interesting approach to systematic sensitivity analysis applied in a Computable General Equilibrium (CGE) modelling framework. This approach offers a systematic method of identifying the model parameters that have the greatest impact on the uncertainty of model output. According to the authors, moreover, it increases the quality of the approximated results by decreasing the dimensionality of the problem. This article contributes to a recent set of studies discussing the accuracy and appropriateness of different uncertainty analysis methods in economic simulation models. While the focus of the article is on a more efficient way of sensitivity analysis, we see a problem in using an arbitrary rotation of Stroud`s octahedron as a benchmark for assessing Monte Carlo simulations. No potential conflict of interest was reported by the authors. Citation: Davit Stepanyan and Harald Gret...

So far uncertainty of input parameters has not often been systematically analyzed in computable general equilibrium (CGE) modeling. Especially this is true when it comes to climate uncertainty. Instead, CGE models are mostly applied in a deterministic setup making their findings highly dependent on point estimates of key exogenous variables. In this study, we employ a Monte Carlo approach to simulate uncertainty of annual rainfall-induced freshwater recharge in Israel. A novelty of our approach is that we systematically determine the sufficient sample size. The CGE model includes a detailed depiction of water supply and demand it also considers alternative water sources, such as desalination and reclamation of wastewater. We apply our approach to determine the minimum water price that should be charged in order to avoid overexploitation of natural freshwater resources with 90% confidence under different desalination-capacity regimes. Our findings suggest that the current pricing sch...

Several environmental changes have encountered the Sudan in the past; several are ongoing and others are projected to happen in the future. The Sudan has witnessed increases in temperature, various floods, rainfall variability and concurrent droughts (USAID, 2016). This study do not only look at the economywide impacts of climate change, but also consults national policy plans, strategies and various other environmental assessments to propose possible interventions. We feed the climate forcing as well as water demand and macro-socioeconomic trends into a modelling suite that includes models for global hydrology, river basin management, water stress and a DSSAT1 all connected to IMPACT2 model. The outcomes are annual crop yield (ton/hectare) and global food prices under various climate change scenarios until 2050. The distributional effects of such changes are assessed using a single country dynamic CGE3 model for the Sudan. Additionally, we introduce yield variability into the CGE m...

Economic simulation models (ESMs) are often deterministic in nature making the results highly dependent on point estimates of key exogenous variables. One way to deal with uncertainty is the application of stochastics in ESMs. However, this step transforms the ESM into a problem of multiple numerical integrations. In order to evaluate those integrals, mostly two different approaches are applied: probabilistic formulae (e.g. Monte Carlo simulations) and efficient formulae (e.g. Gaussian Quadratures (GQ)).

The agricultural sector has the potential to contribute to reaching both global and national climate targets. Lately, frequent discussions emerge among academics as well as policymakers regarding whether the agricultural sector should be subject to carbon pricing under different emission trading systems. Germany has set ambitious climate targets envisaging to reach carbon neutrality by 2045, and the EU plans reaching carbon neutrality by 2050. However, the current GHG emission mitigation trends are not in line with this goal. In this study, we quantitatively analyze the environmental and economic effects of the possible inclusion of the agricultural sector into a carbon pricing scheme, once for Germany only, and second for the EU. Moreover, we evaluate the role of already existing and novel technological mitigation options in the GHG emissions mitigation quest. Our findings demonstrate that even the unilateral action by Germany leads to net agricultural emissions reduction, although...