Disaggregated Rural Economywide Models for Policy Analysis

This paper presents a disaggregated rural economywide modeling (DREM) approach to explore how agricultural and trade policy reforms play out within rural economies of less developed countries (LDCs). DREMS combine the strengths of aggregate, computable-general equilibrium (CGE), and microagricultural household models. We calibrate our model with new microsurvey data from Central Mexico, and we use the model to explore the impacts of policy changes on individual rural household groups as well as on the rural economy as a whole. Simulations highlight how rural market constraints and heterogeneous household responses shape the outcomes of policy reforms.