help: pem dialog:

Title

pem: Partial EquiLibrium Model (PEM)

Table of Contents

Syntax

Options

Models

Description

Saved Results

References

*** PEM Applications

*** Examples

Authors

Syntax

pem Pd Pw [if] [in] , [ model(expbl|impbl|expd|expw|impd|impw) qp(var) qc(var) es(var) ed(var) ] nolist save(file_name)

Options

varlist Two Variables only Pd & Pw respectively:
1- (pd) Private Domestic Price (Pd) (Financial Price)
2- (pw) Social World Price (Pw) (Economic Price)

qp(var) Production Quantity
qc(var) Consumption Quantity

es(var) Supply Price Elasticity: (must be Positive (+) > 0)
ed(var) Demand Price Elasticity: (must be Negative (-) < 0)

nolist Don't Display All Indicators.
save(file_name) Save PEM Model Results in File (*.txt).

*** Important Notes:
pem generates some variables names starting with prefix "_", i.e,:
_NELp, _NELc, _PS, _CS, _GR, _FE, _NET,
So, you must avoid to include variables names with these prefixes

Models

1- model(expbl) Bale-Lutz (PEM) Model - Export Case

2- model(impbl) Bale-Lutz (PEM) Model - Import Case

3- model(expd) Export Tax: Private (Financial Price) - Intervention Case

4- model(expw) No Export Tax: Social (Economic Price) - No Intervention Case

5- model(impd) Import Tariff: Private (Financial Price) - Intervention Case

6- model(impw) No Import Tariff: Social (Economic Price) - No Intervention Case

Description

pem estimates Partial EquiLibrium Model (PEM).

pem estimates Partial EquiLibrium Model (PEM) to get Net Economic Loss in Production,
Net Economic Loss in Consumption, Change in Producer Surplus, Change in Consumer Surplus,
Change in Government Revenue, Change in Foreign Exchange, and Net Economic Loss in (Export/Import).

*** Partial EquiLibrium Model (PEM) Variables ***

** Private Price: ** Social Price:

* Pd = Domestic Price * Pw = Border Price

* NPC = Nominal Protection Coefficient = Pd/Pw

* Txd = Export Tax Rate * Txw = No Export Tax Rate
* = (1-NPC)/NPC * = 1-NPC

* Tmd = Import Tariff Rate * Tmw = No Import Tariff Rate
= (NPC-1)/NPC * = NPC-1

* QPd = Production Quantity * QPw = Production Quantity
* = QP * = QPd-(Esd*(Pd-Pw)*QPd/Pd)

* VPd = Production Value * VPw = Production Value
* = Pd*QPd * = Pw*QPw

* QCd = Consumption Quantity	* QCw = Consumption Quantity
* = QC * = QCd-(Edd*(Pd-Pw)*QCd/Pd)

* VCd = Consumption Value * VCw = Consumption Value
* = Pd*QCd * = Pw*QCw

* Esd = Supply Price Elasticity	* Esw = Supply Price Elasticity
* = ES * = Esd*(Pw*QPd)/(Pd*QPw)

* Edd = Demand Price Elasticity	* Edw = Demand Price Elasticity
* = ED * = Edd*(Pw*QCd)/(Pd*QCw)

* GR = Change in Government Revenue
* FE = Change in Foreign Exchange
* NELp = Net Economic Loss in Production
* NELc = Net Economic Loss in Consumption
* PS = Change in Producer Surplus
* CS = Change in Consumer Surplus
* NET = Net Economic Loss in (Export/Import)
---------------------------------------------------------

(1) * model(expbl): Bale-Lutz (PEM) Model - Export Case ***
(2) * model(impbl): Bale-Lutz (PEM) Model - Import Case ***

NELp=0.5*(QPw-QPd)*(Pw-Pd)
NELc=0.5*(QCw-QCd)*(Pd-Pw)
PS =QPd*(Pd-Pw)-NELp
CS =QCd*(Pw-Pd)-NELc
GR =-NELp-NELc-PS-CS
FE =-Pw*(QPw-QPd+QCd-QCw)
NET = PS+CS+GR = -(NELp+NELc)

(3) * model(expd): Export Tax: Private (Financial Price) - Intervention Case in prevailing (Pd)

NELp= 0.5*Esd*((1-NPC)/NPC)^2*VPd
NELc= |(0.5*Edd*((1-NPC)/NPC)^2*VCd)|
PS = -((((1-NPC)/NPC)*VPd)+NELp)
CS = ((((1-NPC)/NPC)*VCd)-NELc)
GR = ((1-NPC)/NPC)*(VPd-VCd)
FE = -((1-NPC)/NPC^2)*(Esd*VPd-Edd*VCd)
NET = PS+CS+GR = -(NELp+NELc)

(4) * model(expw): No Export Tax: Social (Economic Price) - No Intervention Case in prevailing (Pw)

NELp= 0.5*Esw*(1-NPC)^2*VPw
NELc= |(0.5*Edw*(1-NPC)^2*VCw)|
PS = -(((1-NPC)*VPw)-NELp)
CS = ((1-NPC)*VCw)+NELc
GR = (1-NPC)*(VPw*(1-Esw*(1-NPC))-VCw*(1-Edw*(1-NPC)))
FE = -((1-NPC)*(Esw*VPw-Edw*VCw))
NET = PS+CS+GR = -(NELp+NELc)

(5) * model(impd): Import Tariff: Private (Financial Price) - Intervention Case in prevailing (Pd)

NELp= 0.5*Esd*((NPC-1)/NPC)^2*VPd
NELc= |(0.5*Edd*((NPC-1)/NPC)^2*VCd)|
PS = (((NPC-1)/NPC)*VPd)-NELp
CS = -((((NPC-1)/NPC)*VCd)+NELc)
GR = ((NPC-1)/NPC)*(VCd-VPd)
FE = -((NPC-1)/NPC^2)*(Esd*VPd-Edd*VCd)
NET = PS+CS+GR = -(NELp+NELc)

(6) * model(impw): No Import Tariff: Social (Economic Price) - No Intervention Case in prevailing (Pw)

NELp= 0.5*Esw*((NPC-1)^2)*VPw
NELc= |(0.5*Edw*(NPC-1)^2*VCw)|
PS = ((NPC-1)*VPw)+NELp
CS = -(((NPC-1)*VCw)-NELc)
GR = (NPC-1)*(VCw*(1+Edw*(NPC-1))-VPw*(1+Esw*(NPC-1)))
FE = -((NPC-1)*(Esw*VPw-Edw*VCw))
NET = PS+CS+GR = -(NELp+NELc)

----------------------------------------------------------------------
*** Interpretation of Partial Equilibrium Model (PEM): ***
----------------------------------------------------------------------
1- (NELp) Net Economic Loss in Production:

* Increase (NELp): the producer increase using inputs of production as a result of lower inputs prices and supporting policies to inputs, and therefore inefficiency and irrational in distribution of inputs.

* Decrease (NELp): the producer decrease using inputs of production as a result of higher inputs prices and taxing policies on inputs, and therefore efficiency and rational in distribution of inputs.

----------------------------------------------------------------------
2- (NELc) Net Economic Loss in Consumption:

* Increase (NELc): the consumer increase commodity consumption as a result of lower domestic price, and therefore inefficiency and irrational in the distribution of of consumer spending.

* Decrease (NELc): the consumer decrease commodity consumption as a result of higher domestic price, and therefore efficiency and rational in the distribution of of consumer spending.

----------------------------------------------------------------------
3- (PS) Change in Producer Surplus:

* Gains in Producer Surplus (PS) due to increase revenue than costs as a result of higher domestic price than bprder price, so the producer gains from saling large quantities at high prices, and thus increasing revenue and higher producer welfare.

* Losses in Producer Surplus (PS) due to decrease revenue than costs as a result of lower domestic price than bprder price, so the producer loss from saling small quantities at low prices, and thus decreasing revenue and lower producer welfare.

----------------------------------------------------------------------
4- (CS) Change in Consumer Surplus:

* Gains in Consumer Surplus (CS) due to increasing production with low price, so the consumer gains from consumption large quantities at low prices, thereby increasing consumer spending and higher consumer welfare.

* Losses in Consumer Surplus (CS) due to decreasing production with high price, so the consumer loss from consumption small quantities at high prices, thereby decreasing consumer spending and lower consumer welfare.

----------------------------------------------------------------------
5- (GR) Change in Government Revenue:

* Gains in Government Revenue (GR) due to increasing production than consumption, so the government gains as a result of decrease in the value of imports and saving foreign currency.

* Losses in Government Revenue (GR) due to decreasing production than consumption, so the government loss as a result of increase in the value of imports and non saving foreign currency.

----------------------------------------------------------------------
6- (FE) Change in Foreign Exchange:

* Increase Foreign Exchange (FE) paid because of increase the dependence on imports, and increase the value of imports, as a result of increase in consumption than production.

* Decrease Foreign Exchange (FE) paid because of reduced the dependence on imports, and decline in the value of imports, as a result of decrease consumption than production.

----------------------------------------------------------------------
7- (NET) Net Economic Loss:
Consists of (NELp) and (NELc)

* Increase Net Economic Loss (NET): due to increase in (NELp) as a result inefficiency and irrational in distribution of inputs in the producer behavior, and due to increase in (NELc) as a result of inefficiency and irrational in the distribution of of consumer spending in the consumer behavior.

* Decrease Net Economic Loss (NET): due to decrease in (NELp) as a result efficiency and rational in distribution of inputs in the producer behavior, and due to decrease in (NELc) as a result of efficiency and rational in the distribution of of consumer spending in the consumer behavior.

----------------------------------------------------------------------

Saved Results

pem saves the following results in e():

Matrixes
e(pem) pem Model Results

References

Bale, Malcolm D. & Ernst Lutz (1981)
"Price Distortions in Agriculture and Their Effects: An International Comparison",
Am. J. Ag. Econ., Vol. 63, No. 1, Feb., 1981; 8-22.

Monke, Eric & Scott R. Perason (1989)
"The Policy Analysis Matrix For Agricultural Development",
Cornell Univ. Press, London, UK.

Sadoulet, Elisabeth & Alain Dejanvry (1993)
"Quantitative Development Policy Analysis",
Agric. and Resource Econ., Univ. of California, USA.

Tsakok, Isabelle (1990)
"Agricultural Price Policy: A Practitioner's Guide to Partial Equilibrium Analysis",
Cornell Univ. Press, London, UK.

PEM Applications:

* Data of This example is taken from Isabelle Tsakok (1990), p(240)
* Export Tax on Rice
* according to (Bale-Lutz (PEM) Model) - Export Case

clear all
sysuse pem.dta, clear
pem pd pw in 1/1 , model(impbl) qp(qp) qc(qc) es(es) ed(ed) save(D:\pem)

---------------------------------------------------------
Export Tax on Rice Value
---------------------------------------------------------
Domestic Price (Pd) 3200
Border Price (Pw) 4000
---------------------------------------------------------
Production Quantity (QPd) at (Pd) 0.50
Consumption Quantity (QCd) at (Pd) 0.40
---------------------------------------------------------
Supply Price Elasticity (Esd) 0.80
Demand Price Elasticity	(Edd) -0.50
---------------------------------------------------------
Production Quantity (QPw) at (Pw) 0.60
QPw= QPd-[Esd(Pd-Pw)QPd/Pd]
= 0.50-[0.8(3200-4000)0.50/3200]
---------------------------------------------------------
Consumption Quantity (QCw) at (Pw) 0.35
QCw= QCd-[Edd(Pd-Pw)QCd/Pd]
= 0.40-[-0.5(3200-4000)0.40/3200]
---------------------------------------------------------
** (1) Net Economic Loss in Production 40
NELp= 0.5*(QPw-QPd)*(Pw-Pd)
= 0.5*(0.60-0.50)*(4000-3200)
---------------------------------------------------------
** (2) Net Economic Loss in Consumption 20
NELc= 0.5*(QCw-QCd)*(Pd-Pw)
= 0.5*(0.35-0.40)*(3200-4000)
---------------------------------------------------------
** (3) Change in Producer Surplus -440
PS = QPd*(Pd-Pw)-NELp
= 0.50*(3200-4000)-40
---------------------------------------------------------
** (4) Change in Consumer Surplus 300
CS = QCd*(Pw-Pd)-NELc
= 0.40*(4000-3200)-20
---------------------------------------------------------
** (5) Change in Government Revenue 80
GR = -NELp-NELc-PS-CS
= -40-20-(-440)-300
---------------------------------------------------------
** (6) Change in Foreign Exchange -600
FE = -Pw*(QPw-QPd+QCd-QCw)
= -4000*(0.60-0.50+0.40-0.35)
---------------------------------------------------------
** (7) Net Economic Loss -60
NET = PS+CS+GR = -(NELp+NELc)
= -440+300+80 = -(40+20)
------------------------------------------------------------------------

* Data of This example is taken from Isabelle Tsakok (1990), p(241)
* Import Tarrif on Wheat
* according to (Bale-Lutz (PEM) Model) - Import Case

clear all
sysuse pem.dta, clear
pem pd pw in 2/2 , model(impbl) qp(qp) qc(qc) es(es) ed(ed) save(D:\pem)

---------------------------------------------------------
Import Tarrif on Wheat Value
---------------------------------------------------------
Domestic Price (Pd) 400
Border Price (Pw) 320
---------------------------------------------------------
Production Quantity (QPd) at (Pd) 1,000
Consumption Quantity (QCd) at (Pd) 1,500
---------------------------------------------------------
Supply Price Elasticity (Esd) 0.50
Demand Price Elasticity	(Edd) -0.40
---------------------------------------------------------
Production Quantity (QPw) at (Pw) 900
QPw= QPd-[Esd(Pd-Pw)QPd/Pd]
= 1000-[0.5(400-320)1000/400]
---------------------------------------------------------
Consumption Quantity (QCw) at (Pw) 1,620
QCw= QCd-[Edd(Pd-Pw)QCd/Pd]
= 1500-[-0.4(400-320)1500/400]
---------------------------------------------------------
** (1) Net Economic Loss in Production 4,000
NELp= 0.5*(QPw-QPd)*(Pw-Pd)
= 0.5*(900-1000)*(320-400)
---------------------------------------------------------
** (2) Net Economic Loss in Consumption 4,800
NELc= 0.5*(QCw-QCd)*(Pd-Pw)
= 0.5*(1620-1500)*(400-320)
---------------------------------------------------------
** (3) Change in Producer Surplus 76,000
PS = QPd*(Pd-Pw)-NELp
= 1000*(400-320)-4000
---------------------------------------------------------
** (4) Change in Consumer Surplus -124,800
CS = QCd*(Pw-Pd)-NELc
= 1500*(320-400)-4800
---------------------------------------------------------
** (5) Change in Government Revenue 40,000
GR = -NELp-NELc-PS-CS
= -4000-4800-76000-(-124800)
---------------------------------------------------------
** (6) Change in Foreign Exchange 70,400
FE = -Pw*(QPw-QPd+QCd-QCw)
= -320*(900-1000+1500-1620)
---------------------------------------------------------
** (7) Net Economic Loss -8,800
NET = PS+CS+GR = -(NELp+NELc)
= 76000-124800+40000 = -(4000+4800)
---------------------------------------------------------

Examples:

These examples are taken:
* (1) Export Tax on Rice - Isabelle Tsakok (1990), p(240)
* (2) Import Tarrif on Wheat - Isabelle Tsakok (1990), p(241)
* (3) Wheat - Bale, Malcolm D. & Ernst Lutz (1981), p(18)

clear all

sysuse pem.dta, clear

list

pem pd pw , model(expbl) qp(qp) qc(qc) es(es) ed(ed) save(D:\pem)

-----------------------------------------------------------

pem pd pw in 1/1 , model(expbl) qp(qp) qc(qc) es(es) ed(ed) save(D:\pem)

pem pd pw in 1/1 , model(expd) qp(qp) qc(qc) es(es) ed(ed) save(D:\pem)

pem pd pw in 1/1 , model(expw) qp(qp) qc(qc) es(es) ed(ed) save(D:\pem)

-----------------------------------------------------------

pem pd pw in 2/2 , model(impbl) qp(qp) qc(qc) es(es) ed(ed) save(D:\pem)

pem pd pw in 2/2 , model(impd) qp(qp) qc(qc) es(es) ed(ed) save(D:\pem)

pem pd pw in 2/2 , model(impw) qp(qp) qc(qc) es(es) ed(ed) save(D:\pem)

matlist e(pem)

. clear all
. sysuse pem.dta, clear
. list

+-------------------------------------------+
| pd pw qp qc es ed |
|-------------------------------------------|
1. | 3200 4000 .5 .4 .8 -.5 |
2. | 400 320 1 1.5 .5 -.4 |
3. | 180.18 143 16.15 7.785 .42 -.1 |
+-------------------------------------------+

. pem pd pw , model(expbl) qp(qp) qc(qc) es(es) ed(ed) save(D:\pem)

==============================================================================
*** Partial EquiLibrium Model (PEM) ***
------------------------------------------------------------------------------
* Bale-Lutz (PEM) Model - Export Case
==============================================================================

* Private (Financial Price) Variables:
* Txd : Export Tax Rate
* QPd : Production Quantity
* VPd : Production Value
* QCd : Consumption Quantity
* VCd : Consumption Value
* Esd : Supply Price Elasticity
* Edd : Demand Price Elasticity
------------------------------------------------------------------------------
* Social (Economic Price) Variables:
* Txw : No Export Tax Rate
* QPw : Production Quantity
* VPw : Production Value
* QCw : Consumption Quantity
* VCw : Consumption Value
* Esw : Supply Price Elasticity
* Edw : Demand Price Elasticity
------------------------------------------------------------------------------

+--------------------------------------------------------------------------------------------------+
| | _TXD | _QPD | _VPD | _QCD | _VCD | _ESD | _EDD |
|-------+------------+------------+------------+------------+------------+------------+------------|
| r1 | 0.250 | 0.500 | 1600.000 | 0.400 | 1280.000 | 0.800 | -0.500 |
| r2 | -0.200 | 1.000 | 400.000 | 1.500 | 600.000 | 0.500 | -0.400 |
| r3 | -0.206 | 16.150 | 2909.907 | 7.785 | 1402.701 | 0.420 | -0.100 |
+--------------------------------------------------------------------------------------------------+

+--------------------------------------------------------------------------------------------------+
| Mean | -0.052 | 5.883 | 1636.636 | 3.228 | 1094.234 | 0.573 | -0.333 |
+--------------------------------------------------------------------------------------------------+

+--------------------------------------------------------------------------------------------------+
| | _TXW | _QPW | _VPW | _QCW | _VCW | _ESW | _EDW |
|-------+------------+------------+------------+------------+------------+------------+------------|
| r1 | 0.200 | 0.600 | 2400.000 | 0.350 | 1400.000 | 0.833 | -0.714 |
| r2 | -0.250 | 0.900 | 288.000 | 1.620 | 518.400 | 0.444 | -0.296 |
| r3 | -0.260 | 14.750 | 2109.298 | 7.946 | 1136.227 | 0.365 | -0.078 |
+--------------------------------------------------------------------------------------------------+

+--------------------------------------------------------------------------------------------------+
| Mean | -0.103 | 5.417 | 1599.099 | 3.305 | 1018.209 | 0.548 | -0.363 |
+--------------------------------------------------------------------------------------------------+

==============================================================================
*** Partial EquiLibrium Model (PEM) Results ***
------------------------------------------------------------------------------
* NELp: Net Economic Loss in Production
* NELc: Net Economic Loss in Consumption
* PS : Change in Producer Surplus
* CS : Change in Consumer Surplus
* GR : Change in Government Revenue
* FE : Change in Foreign Exchange
* NET : Net Economic Loss in Export
==============================================================================

+--------------------------------------------------------------------------------------------------+
| | _NELp | _NELc | _PS | _CS | _GR | _FE | _NET |
|-------+------------+------------+------------+------------+------------+------------+------------|
| r1 | 40.000 | 20.000 | -440.000 | 300.000 | 80.000 | -600.000 | -60.000 |
| r2 | 4.000 | 4.800 | 76.000 | -124.800 | 40.000 | 70.400 | -8.800 |
| r3 | 26.020 | 2.986 | 574.437 | -292.433 | -311.011 | 223.124 | -29.006 |
+--------------------------------------------------------------------------------------------------+

+--------------------------------------------------------------------------------------------------+
| Mean | 23.340 | 9.262 | 70.146 | -39.078 | -63.670 | -102.159 | -32.602 |
+--------------------------------------------------------------------------------------------------+

*** Save Partial EquiLibrium Model (PEM) ***
*** Partial EquiLibrium Model (PEM) Results File Has Been saved in:

Data Directory: D:\Stata

Open File: D:\pem.txt
--------------------------------------------------

Authors

- Emad Abd Elmessih Shehata
Professor (PhD Economics)
Agricultural Research Center - Agricultural Economics Research Institute - Egypt
Email: emadstat@hotmail.com
WebPage at IDEAS: http://ideas.repec.org/f/psh494.html
WebPage at EconPapers: http://econpapers.repec.org/RAS/psh494.htm

- Sahra Khaleel A. Mickaiel
Professor (PhD Economics)
Cairo University - Faculty of Agriculture - Department of Economics - Egypt
Email: sahra_atta@hotmail.com
WebPage at IDEAS: http://ideas.repec.org/f/pmi520.html
WebPage at EconPapers: http://econpapers.repec.org/RAS/pmi520.htm

PEM Citation

Shehata, Emad Abd Elmessih & Sahra Khaleel A. Mickaiel (2013)

PEM: "Stata Module to Estimate Partial Equilibrium Model (PEM)"

http://ideas.repec.org/c/boc/bocode/s457758.html

http://econpapers.repec.org/software/bocbocode/s457758.htm

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