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Removal of farm subsidies in a regional economy: a computable general equilibrium analysis

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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.

Document Type: Research Article


Affiliations: 1: Faculty of Economics, Department of Economics, University of Extremadura, Badajoz, Spain 2: Faculty of Economics, Department of Economic Theory, University of Barcelona Spain and CREB, Barcelona 08034, Spain

Publication date: August 1, 2008

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