Does timing and announcement matter? Restricting the production of pigs within a dynamic CGE model

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Philip D Adams, Lill Thanning Andersen, Lars Bo Jacobsen

We address the issue of timing and announcement within a dynamic applied general equilibrium model of the Danish economy. Specifically we analyse the introduction of a quota on the production of pigs. Two scenarios are analysed, namely the introduction of a once-off quota without any previous announcement, and secondly an announced gradually phased in production quota. Our findings suggest that the adjustment path is smoother when the policy is announced compared with the one being implemented without warning. This is the result of investors anticipating correctly future adjustments in prices and rental rates when making their investment decisions. Hence, the capital stock starts to adjust from the start of the simulation. When the quota is implemented without warning investors adjusts fully when the quota is implemented. However, the environmental gains are obtained faster in this case due to the method of
implementation. In the long run we find that the alternative timing strategies lead to similar results.
Original languageEnglish
PublisherStatens Jordbrugs- og Fiskeriøkonomiske Institut
Number of pages27
Publication statusPublished - 2001
SeriesSJFI Working Paper
Number18/2001

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