How applicable is the GTAP database in agriculturally oriented CGE modelling for the case of the Czech Republic? An empirical analysis

Annotation: The aim of the paper is to assess the extent to which the GTAP database can serve as a reliable source for the agricultural simulations based on the general equilibrium approach. In the paper, the results of selected simulations derived from the locally constructed SAM are compared with the results derived from the CGE model based on the GTAP database. The CGE model applied in this paper contains a sector of agriculture disaggregated into seven sub sectors and aggregated sectors of manufacturing and services. Three scenarios, which model the situation of subsidy removal, subsidy decoupling and import tariff removal, were applied and the results under both database alternatives compared. The analysis shows that the strongest discrepancies can be found in the lowest (industry/sector) level when comparing the cross-commodity effects. With respect to the discrepancies in the structure of agriculture and subsidy rates, the impacts of the agrarian policy can produce completely contradictive results. Regarding the more aggregated sector level, the changes are more modest as they reflect average impacts of the particular agricultural sub sectors. Finally, no significant differences were found out regarding the macroeconomic aggregates, which shows that the structure of the agriculture has a negligible impact on the GDP. Based on this evidence, it can be concluded that the GTAP database should be used carefully if applied in the CGE models with a detailed agrarian policy orientation. Special importance should be paid on the detailed per sector subsidy rates as these can substantially affect the results of simulations.