USING PRODUCER AND CONSUMER SUBSIDY EQUIVALENTS IN THE SWOPSIM MODELING FRAMEWORK

Producer subsidy equivalents (PSE's) and consumer subsidy equivalents (CSE' s) are used as aggregate policy measures in the U.S. Department of Agriculture's (USDA) modeling of the effects of trade liberalization on world agriculture. This report examines some issues concerning the use of PSE' s and (SE '5 in the modeling of agricultural trade liberalization in the context of the Static World Policy Simulation (SW)PSIM) models of USDA. It discusses some of the assumptions required when using PSE's and (SE's in SWOPSIM, the possible shortcomings of those assumptions, and alternative ways of dealing with the Shortcomings. Three related topics are: (1) using PSE's and CSE's as approximations to specific policy interventions such as target prices, loan rates, and export restitutions, (2) adjustments to PSE's when modeling acreage set-asides and/or supply controls, and (3) initialization of the model in the context of distortions