MODELLING THE DISTRIBUTIONAL IMPACTS OF AGRICULTURAL POLICIES IN DEVELOPING COUNTRIES: THE DEVELOPMENT POLICY EVALUATION MODEL (DEVPEM)

The purpose of the Development Policy Evaluation Model (DEVPEM) is to provide an appropriate modelling structure for analysing the welfare and distributional implications of alternative agricultural policies in developing countries. The aim of the model is to provide illustrative results that show how structural diversity among developing countries, and systemic differences from developed OECD countries, can affect the outcomes of alternative policy interventions. The model is relatively stylised, seeking to capture, as simply as possible, four critical aspects of rural economies in developing countries that are important when evaluating the impacts of agricultural and trade policies. These are: (1). The role of the household as both a producer and a consumer of food crops. (2). High transaction costs of participating in markets, resulting in a subsistence sector that often is important in terms of the number of households and the amount of food production it encompasses. (3). Market linkages that can transmit impacts of policy and market shocks among heterogeneous rural producers and consumers, particularly via factor markets (for labour, land or capital, when those markets exist). (4). The imperfect convertibility of land from one use to another.