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THE ECONOMIC IMPACT OF CROP LOSSES: A COMPUTABLE GENERAL EQUILIBRIUM APPROACH

The impact of crop losses on the U.S. economy are analyzed using a Computable General Equilibrium (CGE) Model. In doing so, concerns about widespread crop losses due to a global climate change or environmental event are addressed. The CGE approach allows for analysis of the interactions between supply and demand within agricultural markets as well as between these markets and the rest of the economy. The results suggest that policy responses which allow free market pricing signals to determine production mitigate the effects of an event that approximates the drought of 1988.