Agricultural Policy Impact Analysis with Multi-Market Models: A Primer

Many governments intervene directly in agricultural product, in particular food, markets. A quantitative assessment of the impact of the policy changes on the desired objectives is important as it helps inform and shape the policy debate on the reform alternatives and increases transparency of government policy. This paper reviews the literature on multi-market models which offer more accurate ex ante impact analysis than single-market models by including potentially important indirect effects. While fairly complex and requiring large amounts of data multi-market models are however much simpler than computable general equilibrium models. They are typically applied at the sector level and have proven quite popular in particular in agricultural policy reform impact analysis. While more recent work has emphasized the poverty reduction and income distribution objective the models can generate a range of information relevant to policy makers.