Macroeconomics of Turkey’s agricultural reforms: an intertemporal computable general equilibrium analysis

Abstract

Turkey recently launched a set of structural reforms to address elimination of producer price subsidies in its agriculture, and replacing them with a targeted direct income transfer program. The paper investigates analytically viable options of the proposed agricultural-cum-fiscal reform and analyzes the formal links between the public sector fiscal balances, accumulation patterns, dynamic resource allocation, and consumer welfare under a medium-long-term horizon. We utilize a dynamic general equilibrium model. The model results suggest that even though there are expected modest welfare gains of consumers' intertemporal efficiency, the repercussions of these policies on the rural economy and aggregate gross domestic product are likely to be deflationary.

Neo‐Liberal Transformation of Turkish Agriculture

“…The provision of the DIS for all the land in the country threatens the viability of agriculture as it encourages farmers to concentrate on a few crops at the expense of agricultural diversity and food security. It is difficult to disagree with the arguments of Doğruel et al. (2001).…”

“…The claim that the DIS will ensure more productive and efficient resource allocation and thus improve the overall economic performance in the country is challenged by Doğruel and Yeldan (2001), who argue that the DIS will generate deflationary results within 15 years, in which time agricultural production will decrease by 5.5 per cent and aggregate GDP by 2 per cent. Furthermore, they calculate that as a consequence of the new agricultural support system, the ratio of debt to the GDP will increase, and consequently capital investments will decline.…”

“…Their recommendation that the country would be better off by following effective planning for agricultural production needs to be taken seriously. The DIS is not only incapable of achieving efficient resource allocation and improved social welfare in rural areas, but is also conducive to the over‐production of certain crops at the expense of others (Doğruel et al. 2001).…”

Hardened Budget Constraints in Romania: An Approach by CGE Modeling

“…Models that are to be noted are applied to transition countries and have two main features: they take into account country specificities and treat topics such as deregulation, cutting subsidies or privatisation (Chisari & Ferro, 2005;Dogruel et al, 2003;Lofgren & El-Said, 2001;World Bank, 2002a;Zalai, 1998).…”

Economic Development and Structural Change

“…Several studies show that the total monetary value of subsidies given to the agricultural sector reached 11.3 billions US dollar in 1998 (Çakmak et al 1999). Budgetary transfers to the sector, on the other hand, amount to an average of $3.5 billions per annum over the last¯ve years (Doğruel et al 2003). According to Çakmak (2003), the contribution of agriculture policies to the farmers' revenue increased by 2.7 folds À À À from $2.7 billion to $7.6 billion À À À from the mid-1980s to the end of the 1990s.…”