Our model’s equilibrium conditions are also standard. The commodity market is balanced by an adjustment of the market price of each commodity. The labor market is perfectly segmented and balances out with an adjustment of the nominal wage on each of the respective markets (skilled and unskilled)<sup>19</sup> . It is therefore possible for workers to move from one sector to another, but not from one market to another. We use two closures for the labor markets in simulation. In the first option, labor supply is fixed and in the second it is endogenous. In the latter case, we use a standard wage curve as in Carneira and Arbache (2003) and Annabi et al (2005) where labor supply increases (decreases) with an increase (decrease) in real wage on each market<sup>20</sup> . The increase in labour can come either from the extensive margin (number of hours worked) or the intensive margin (more workers enter the market). The current account balance is exogenous, and it balances out with an adjustment of the nominal exchange rate<sup>21</sup> . Finally, investment is savings driven in the model, meaning that total investment equals sum of household and government savings and borrowings from the rest of the world.

# **2.1.1.1 The data**

The social accounting matrix (SAM) necessary for the implementation of a CGE mode was constructed with the main data drawn from an input–output table with 18 productive sectors.<sup>22</sup> The reference year for the SAM is 2006. As noted earlier, our model for Mali covers 20 production sectors, including jatropha, biofuels, fossil fuels and other energies (mainly electricity). Jatropha and biofuels were not found in the initial SAM (Coulibaly 2009). We used information from the sectoral analysis presented in Coulibaly et al (2010) to disaggregate the sectors from crop agriculture and fuel sectors. The size of these sectors is relatively small in Mali but they present substantial potential for growth. The microhousehold data base for 4494 households was constructed from the 2006 _Enquête légère intégrée auprès des ménages_ (ELIM-2006) survey. The main task for constructing this database is to modify the income and expenditure structures for the households based on the nomenclature of the SAM.

## **2.1.2 Micro household module**

In the micro household module, we include all of the 4,494 households from the survey (ELIM-2006). We have specified income and expenditure functions for the households, which are parameterized on the household-specific information found in the survey. As

> 19 For a detail discussion on such labor market segmentation, the reader can consult Boeters and Savard (2012).

> 20 This type of endogenous labour supply approach is based  on Blanchflower and Oswald (1998). Based on Card (1995), we posit higher elasticity for the nonqualified of around 0.17 and 0.06 for the qualified workers. 21 When performing distributional analysis, it is usually recommended to maintain the current account balance exogenous. This prevents obtaining gains in welfare through an increase current account deficit (or increase in foreign savings). This constraint imposes using either the nominal exchange rate or the price index as the adjustment variable to balance out the current account balance. Since it is the real exchange rate that is important (nominal exchange rate over the price index), fixing one of the other is irrelevant and results will be the same.

> 22 The original input-output matrix was obtained from the “Direction nationale de la statistique et de l'informatique.”

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