Annex D. The OECD Policy Evaluation Model

The Policy Evaluation Model (PEM) is a partial equilibrium model of agricultural production that is designed to connect the data in the PSE database with economic outcomes in terms of production, trade and welfare in a stylised manner. It uses the PSE classification scheme as an organising principle to represent the agricultural policies in selected countries in such a way that the economic distinctions that guide the PSE classification are highlighted. Specifically the model takes into account the initial incidence of a policy, such as whether it is directed at land, input use or output, and whether the policy should affect current resource allocation decisions, primarily driven by whether policies require or not current production as a condition of eligibility.