Abstract:
Most partial equilibrium models of the agricultural sector have not incorporated a dynamic and
interlinked module for agricultural input expenditure. The South African Bureau for Food and
Agricultural Policy (BFAP) model, which models a major share of agricultural output in South
Africa, has also up to now not integrated input expenditure into the modelling framework. In
most models, input costs are treated as exogenous and the recursive link between the input
and output sides of the sector is overlooked in the models that attempt to incorporate input
expenditures. This article addresses both issues by integrating agricultural input expenditures
into the South African sectoral partial equilibrium model by endogenising input costs and
recursively linking both the input and output sides of the agricultural sector. Thus, the impact of
increasing the input cost may not only signal a fall in the gross value added and net farming
income, but also a growth in subsequent years when the recursive effect of the impact is fully
accounted for.
