Assessing the prediction capacity of an agricultural supply positive mathematical programming model

Abstract

Abstract In this paper, the calibration and prediction capacity of a supply response positive mathematical programming model (PMP) for the Alentejo region is evaluated. The model is calibrated with prices and agricultural subsidies of the base year (2000), using the specification rules of the cost function standard, Paris standard, average cost and exogenous elasticities. Then, the model is utilized for prediction of crop and livestock supply with prices and subsidies of 2004. Model results for 2000 and 2004 agricultural price and subsidies are compared, with available data, regarding optimal combination of activities, in order to test models capacity to reproduce Alentejo agricultural sector behaviour in response to changes in prices and agricultural policy. Results showed that the PMP model reproduces exactly the observed activity levels on the base year, whatever the rule used to specify the cost function, and that PMP is an efficient instrument to predict agricultural supply, mainly using the exogenous elasticities specification rule. JEL classification: C61