Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/229438
Authors: 
Mukashov, Askar
Year of Publication: 
2021
Series/Report no.: 
Working Papers of Agricultural Policy No. WP2021-01
Abstract: 
This paper suggests using portfolio management methods in policy planning models as a practical tool for determining optimal policy under model parameter uncertainty. We suggest that in addition to calculating the standard policy return estimates, policy options should also be analyzed from the risk perspective by using metrics that inform the effect of parameter uncertainty on policy impact variation. We demonstrate the approach in a Computable General Equilibrium model that analyzes pro-poor agricultural value chains in Senegal under world market uncertainty. We show that prioritizing the rice sector is the most effective policy in terms of expected policy return, but this policy is also associated with the highest risk, leading to an increase in poverty under unfavorable yet realistic scenarios. Much like diversified portfolios in finance, mixed policies that assume the rice sector's promotion combined with other sectors such as milk, vegetables, oilseeds, or fishery, can offer risk reduction at the cost of reduced expected policy return.
Subjects: 
policy analysis
CGE modeling
portfolio management
pro-poor growth
JEL: 
D58
C68
O13
Q11
I3
O21
G11
Document Type: 
Working Paper

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