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ESTIMATING PUBLIC SPENDING REQUIREMENTS 59


See Tables 3A.1–3A.7 in the appendix for estimates of the different parameters in different countries and regions. The results from applying the formula are simulated amounts of spending in the future, so it is important to consider how and the extent to which the values of the parameters are likely to change over time, because the values of the parameters would be estimates based on historical trends that are likely to change in the future. These would also have to be determined based on expert opinion or plausible assumptions. Thus, it will be more prudent to use the formula to simulate a range of estimates instead of a point estimate. The lower end of the range would correspond to an optimistic public spending scenario characterized by, for example, high spending effi ciency (larger values of εη


mentary interaction effects (larger positive values of Φη


effect of public on private investments (larger positive values of εFi ag,nag and ΦFi


Eag), increased crowding-in Eag), and comple-


ag,nag). In contrast,


the upper end of the range would correspond to a less optimistic public spending scenario characterized by low spending effi ciency (smaller values of εη out or reduced crowding-in effects (negative or smaller positive values of εFi stitutive interaction effects (negative or smaller positive values of Φη


ag,nag and ΦFi


Eag), crowding- Eag), and sub-


ag,nag ).


Another way of obtaining the range of estimates is by simulating the growth rate of the amount of resources required in a stepwise fashion by considering the assumptions additively. For example, start with the assumption that the additional agricultural gross domestic product (GDP) growth rate required to achieve the target (that is, θ


ˆ additional growth in PAE only (that is, E


E˙θ ˆ


ag = ——————————————— αi


θag − θag ˆ — Eag + Φη η 1 (εη ag,nag Enag ) + ∑ — (εFi i Fi Eag + ΦFi


————. ag,nag Enag


) (13)


Other assumptions can be relaxed one at a time to obtain the relevant stream of lower estimates. Although we have distinguished two sources of agricultural growth (factor


accumulation Fi and TFP η), several of the estimated elasticities with respect to public spending in the literature do not make this distinction. They are estimated


in the aggregate, that is, εQ Eng, εQ Enag, and ΦQ ag,nag, with the fi rst two variables represent-


ing the elasticity of output Q (measured by the value of agricultural GDP, for example) with respect to PAE and PNE, respectively. The third variable represents the effect of the interaction between PAE and PNE on output. See Tables 3A.1,


ag – θag, where θag is the growth in the base period) is derived from ˙


reduces Equation 12 to the one shown in Equation 13, whose simulated results refl ect the upper bound on the resource requirements:


nag = X ˙η = X ˙


Fi = X ˙


P = 0). This assumption


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