A quantitative agricultural planning methodology

This paper is prepared for staff use and is not for publication. The views are those of the authors and not necessarily those of the Bank. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT Bank Staff Working Paper No. 180 May, 1974 A QUANTITATIVE AGRICULTURAL PLANNING METHODOLOGY* This paper describes the quantitative agricultural planning proce- dures used in Mexico recently as part of a national policy reformulation process. The procedures involved extensive use of the model Chac, which had ** been developed previously in a joint DRC-Mexican government research project. In this paper, the operational version of the model is fully Uescribed in words and a rather complete set of applied results is presented with inter- pretations. At the outset, sonle drawbacks to more traditional agricultural planning practices are outlined and it is shown how the Chac method overcomes at least some of them. The results presented include (a) simulations of alternative paths for the sector in terms of macro variables (output, prices, employment, etc.); (b) estimates of short-run.and long-run sectoral elasticities of supply; (c) alternative measurements of elasticities of capital-labor substitution for the sector; (d) a sectoral income distribution; (e) an estimate of seasonal employment patterns; and (f) estimates of parameters of derived demands for key inputs. For the capital-labor substitution estimates, it was possible to isolate the substitution effects of medium-term capital only (agricultural machinery). This kind of capital is almost always a substitute for labor, whereas land, irrigation works and other forms of long-term capital are normally complements to the use of labor. Therefore, by separating out machinery for measurement, the measured elasticities of substitution were significantly higher than the values obtained in other studies where all forms of capital are aggregated. * Paper presented to the Sixth International Conference on Input-Output Techniques, Vienna, April, 1974. ** For a description of the initial numerical version of Chac, see J. Duloy and R. Norton, "Chac, a Programming Model of Mexican Agriculture," Ch.IV. 1 in L. Goreux and A. Manne, eds., Multi-level Planning: Case Studies in Mexico, North-Holland Publishing Co., 1973. Prepared by Roger D. Norton, Economist, Development Planning Division, Development Research Center, Development Policy and Luz MarXa Bassoco, Secretarl'a de la Presidencia, Mexico (Derived from research project RPO:216, "Mexico Agricult ral Study.")  A QUANTITATIVE AGRICULTURAL PLANNING