The purpose of this article is to analyse the importance of farm subsidies for the Extremadura economy. To this end, a computable general equilibrium model for this region is presented, with which we analyse the economic effects caused by a simulated removal of these subsidies. Different scenarios involving the labour market rigidities and tax compensation are considered. Model parameters are determined by the procedure known as calibration, using a social accounting matrix constructed for this economy. The results clearly show the negative effects that this elimination would produce on the main micro and macroeconomic variables.
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Document Type: Research Article
Faculty of Economics, Department of Economics, University of Extremadura, Badajoz, Spain
Faculty of Economics, Department of Economic Theory, University of Barcelona Spain and CREB, Barcelona 08034, Spain
Publication date: 2008-08-01
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