Download Διαφάνεια 1

Demonstration of capabilities of a biregional CGE model to assess impacts of
rural
development
policies
(RURMOD-E)
Demonstration Workshop
Brussels, 26.11.2008
SPECIFICATION OF POLICY
SCENARIOS
Demetrios Psaltopoulos
Department of Economics
University of Patras
Introduction
Objective
Present specification of the 5 RURMOD-E Policy
Scenarios
Including causal mechanisms
Policy Scenarios
Full Decoupling
Increased Modulation (CAP H-C proposal):


i) Demand for construction
ii) Soft Modulation
Agriculture-centred RD Measures
Diversification of Rural Economy project
Renovation and Development of Villages project
Scenario 1: Full Decoupling (FULL DEC)
Coupled support flowing to the agricultural sector
becomes fully decoupled.
CAP subsidies (base year) set to zero – value
transferred from govt. to agricultural HSH (SFP).
No modulation assumed.
Two Direct Impacts


Increase in indirect activity tax rate for
agriculture
Increase in the income of agricultural HSH
Scenario 1: Full Decoupling – Direct Impact 1
 Net Indirect Activity Tax of Agricultural Sector

 Value Added of Agricultural Sector

Activity of the Agricultural Sector  Domestic
Production of Agricultural Products
 Labour is free from agriculture   PCap.& PLand


Agricultural is linked with the other Rural/Urban
Sectors  Second-order Production, Price, HHS
Income Effects ()
 AGGREGATE AND NET RURAL/ URBAN
EFFECT DEPENDS ON COMPETING FORCES
Scenario 1: Full Decoupling – Direct Impact 2
 Direct Income Transfers from GOV to Agr. HHS

 Income and Spending of Agr. HHS

Goods Produced in the
study regions

Leak towards the RoW

Second-order Production,
Factor and Goods Prices
Price & HHS Income
 Production
effects ()
TOTAL EFFECT DEPENDS ON INTERACTION OF THE
TWO MECHANISMS
Scenario 2: Increased Modulation (MODUL, SOFT
MOD)
Income support to agricultural HSH is reduced by 13%.
Equivalent amount + national co-financing (25% of total)
transferred to Pillar 2 as increased demand for:


Construction (MODUL)
Construction, Machinery, Education, Public Administration
(equal % - SOFT MOD)
Private contribution not taken into account.
Three Direct Impacts

Scenario 1 Impacts

Increased investment demand impact
Scenario 2: Increased Modulation
 Exogenous Investment Demand of the Construction
(etc.) Commodity(ies)

Domestic Production of the Construction (etc.)
Commodity(ies)

Domestic Activity of the Construction (etc.) Sector(s)
What Happens with the Domestic Activity of other
Sectors? Usually positive effects in other sectors, but
possible trade-off due to decrease in AgrHHS
Consumption.

  Employment,   GDP
Scenario 3: Agriculture-centred RD Measures (RDM-AGRI (Axes 1,2))
Income support to agricultural HSH is reduced by 13%.
Equivalent amount + national co-financing (25% of total) transferred to Pillar
2 for Axes 1 and 2 measures.
To that we add study-area-specific public expenditure on Axes 1 and 2
measures {average per annum for 2000-2006 (Greece) and 2004-2006.(Czech
Republic)}
 Distribution of expenditure to measures follows the 2000-2006 (Greece) and
2004-2006 (Czech Republic) patterns, respectively
 Axis 1 expenditure: Increased demand for construction (70%) and machinery
(30%) {Farm Investment Plans + Young Farmers + Processing} and increase
in the income of Agricultural HHS (Early Retirement)
Axis 2 expenditure: Increased farm output (Agri-environment) and increase in
the income of Agricultural HHS (LFA)
Archanes-Heraklion

Axis 1: 67% of P2 (16% Early Retirement – 51% FIS, YFS, FP)

Axis 2: 33% of P2 (1.4% Agri-env. – 31.6% LFA)
Bruntal:

Axis 1: 3.7% of P2 (2.6% FIS, YFS, FP – 1.1% Early Retirement)

Axis 2: 96.3% of P2 (43.3% Agri-env. – 53% LFA)
Scenarios 4 and 5: Rural Development (Axis 3) Projects
Diversification of Rural Economy project (311)
Renovation and Development of Villages project (322)
Real data from 2 projects implemented in the Greek study area
Same shock to both models
Expenditure (construction stage)
Business turnover (311)
Estimate of increase in tourism (322)
Real values (base-year)
Potentially we could also assess:

Effects of change in local purchasing pattern (311)

Effects of migration of urban HSH to rural area (322)
Scenario 4: Diversification of Rural Economy project (311, RDIVERS)
Agrotourism unit
12 rooms – 24 beds
Surrounding area infrastructure + building + machinery and
equipment
Total cost (2004 prices) is 519.200 Euro (55% Public Expenditure –
45% Private)
Distribution:

Energy (40-41): 0.4%

Wholesale Trade (50-51): 1.3%

Retail Trade (52): 0.5%

Other Manufacturing (29): 6.8%

Private Services (70-74): 4.4%

Furniture (36): 3.8%

Construction (45): 82.8%
New Business turnover (55): 119000 Euro per annum
Scenario 5: Renovation and Development of Villages project (322,
RENOV)
Village Square
Total cost (2004 prices) is 228858 Euro (100% Public
Expenditure)
Distribution:
 Energy (40-41): 18.5%
 Private Services (70-74): 18.9%
 Construction (45): 62.6%
Estimate of increase in tourism flows: +10% per annum
Scenarios 4 and 5: Rural Development (Axis 3) Projects
Diversification of Rural Economy project (311)
Renovation and Development of Villages project
(322)
Real data from 2 projects implemented in the Greek
study area
Same shock to both models
Expenditure (construction stage)
Business turnover (311)
Estimate of increase in tourism (322)
Real values (base-year)
THANK YOU FOR YOUR ATTENTION!!!