Macroeconomics of Greening Turkish Agriculture: A General Equilibrium Analysis of Input Rationalization Policies

Abstract

With the aid of an applied general equilibrium model, we study the macroeconomic effects of various policy alternatives to stimulate the implications of the greening of Turkish agriculture. Our results suggest that the reduction in chemicals, including synthetic fertilizers, and fossil oil combustion at alternative rates of 30% and 50% would significantly reduce carbon emissions, but at the expense of adverse effects on agricultural output. In response, the negative effects on agricultural output can be reversed by a targeted investment programme that could facilitate technological change and a commensurate rationalization of the rural economy, resulting in enhanced gains in agricultural productivity. We argue that the warranted funds towards such productivity-enhancing investments can be earmarked by the introduction of a nationwide carbon tax, and that they would boost not only agricultural output and rural incomes but could also mitigate the adverse transition costs on GDP and social welfare.