Essay About Assessment Models And Farm Level

Integrated Assessment Models For Agricultural Systems:
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Integrated Assessment Models for Agricultural Systems:
Micro-Foundations, Aggregation and Market Equilibrium
PhD Research Proposal
Roberto Valdivia
Department of Agricultural Economics and Economics, Montana State University, USA
February 2006
PhD Research Proposal to Wageningen University, The Netherlands.
Copyright 2006 by Roberto Valdivia. All rights reserved. Readers may make
verbatim copies of this document for non-commercial purposes by any means,
provided that this copyright notice appears on all such copies.
Integrated Assessment Models for Agricultural Systems:
Micro-Foundations, Aggregation and Market Equilibrium
PhD. Research Proposal
By Roberto Valdivia
February, 2006
SUMMARY
One of the aims of agricultural research is to develop sustainable agricultural
production systems that balance the often competing goals of profitability, human and
environmental health, and equity. Typically, the integrated assessment required for this
analysis takes place at the farm level where farming systems are analyzed, and changes to
the cropping system are designed for a better performance of the system given numerous
boundary conditions including the agro-ecological conditions, markets and agricultural
policies. Although the analysis is only valid at the farm level, the results are often used at
higher scale levels assuming a certain level of representativeness of the farming system.
At higher scale levels different processes become important and we have to deal with the
intrinsic variability of the population of farming systems. In addition, interactions
between farms become important. Boundary conditions assumed to be constant at the
farm level (e.g. prices) are now driven by the population of farmers.
The tradeoff analysis model links site-specific bio-physical process models and
economic decision models, and thus deals explicitly with the intrinsic variability of farms
and growing conditions, but treats prices as exogenous. This study will develop methods
to link the tradeoff analysis model to market models that treat prices as endogenous. This
price-endogenous model shows how both market-level demand-side and supply-side
variables affect the spatial distribution of economic and environmental outcomes. This
study will investigate the effects of price endogeneity at different spatial scales (farmregion-
market) using empirical studies of climate change, environmental services and soil
conservation.
OBJECTIVES
a. History
Modeling agricultural production systems: Scale issues, heterogeneity and aggregation
problems
There is a growing interest in developing methods and tools to assess the
sustainability of agricultural production systems, including their economic,
environmental and human health impacts (UC SAREP, 2002). A growing body of
evidence shows that economic and environmental impacts of agricultural systems depend
on farm management decisions and on the interaction of these decisions with site-specific
environmental conditions. On the one hand, methods have been developed to integrate
biophysical and economic models at a disaggregated level with the objective of capturing
the heterogeneity of the physical environment and economic behavior of farmers (see for
example, Hochman and Zilberman, 1978; Just and Antle, 1990; Goddard et al., 1996;
Fleming and Adams, 1997; Antle et al., 2000; Brown, 2000; Antle and Capalbo, 2001;
Antle and Stoorvogel, 2001; Mathur, 2003; Stoorvogel et al., 2004b). On the other hand,
aggregated models based on the construct of “representative agent” have been widely
used in policy decision making. Market equilibrium models are a good example of these
models. They have been used to evaluate welfare implications of a particular change
(policies, climate change, etc.), using representative data of producer and consumer
behaviors. This implies that aggregated models do not capture the biophysical and
economical heterogeneity that characterizes the production system. Conversely, results
from integrated assessment models that capture this heterogeneity have not been linked to
market equilibrium models. The literature reviewed shows there is a need to address this
gap between integrated assessment models and market equilibrium models.
As more micro-data have become available, more studies in the literature have
compared outcomes from aggregated models versus micro models. Wu and Adams
(2002) show that aggregate models may predict aggregate variables