General Equilibrium Modelling Applied to Romania (GEMAR): Focusing on the Agricultural and Food Sectors

Applied general equilibrium modelling represents a powerful tool for assessing future likely economic changes due to upcoming or hypothesised policy shocks such as those brought about by EU enlargement. It entails the main advantage of considering the complex simultaneous linkages, interactions and feedback effects between various sectors, institutions and factor resources within an economy, as well as the inter- and intra-industry trade links with other economies across the globe. This technical paper develops a general equilibrium model applied to Romania (GEMAR) with an emphasis on the agricultural and food processing activities. A simple simulation example is then given for illustrative purposes. More extensive use of GEMAR will be made in other forthcoming papers where the model will be employed to identify those economic impacts stemming from incorporating Romania's agricultural and food sectors into EU/CAP structures. The model is static with constant returns to scale and perfect competition in production. Other studies have deployed modelling techniques to deal with EU accession issues. However, the literature assessing separately the economic effects of CAP enlargement for Romania is extremely sparse. In addition, as far as the authors are aware of, there are no studies that solely focused on the likely economic effects of CAP enlargement on Romanian agricultural and food processing sectors at a disaggregated level and within a single-country general equilibrium framework. Hence, the paper should not only fill in a gap in the modelling literature dealing with EU's next phase of eastward expansion but also tackle an issue of current interest for both researchers and policy-makers involved in agriculture and economic development.