A Computable Household Model Approach to Policy Analysis: Structural Adjustment and the Peasantry in Morocco

This paper opens a new field in quantitative policy analysis by developing a methodology for the construction and simulation of computable non-separable household models. Non-separability originates in market failures and in a binding credit constraint, both of which transform the products and factors affected into non-tradeables. The methodology is applied to a simulation of the impact on Moroccan peasant households of the new pricing rules for cereals introduced by structural adjustment. The results show that the elasticity of supply of tradeables is hampered by the presence of nontradeable factors in the household; that small farmers are pushed on to the labour market as a strategy to relax a credit constraint; and that technological change should be directed at enhancing the productivity of nontradeables to increase the elasticity of supply response of tradeables. Further, a rising price for cereals shifts the farm economy from animals to crops. Nevertheless, as the price of trade able animal forage rises, child labour used for herding in the commons is substituted for this forage, and children's work load increases. The expected consequence is increased school absenteeism and more overgrazing in the commons, two historical curses of Moroccan underdevelopment.