on revenue and 10 percent on profits. Thus, the total effect of trade reform for this particular farm is a decline in revenue of 14.7 percent and a decline in profits of about 40.3 percent. On the other hand, the farmer benefits from the water reform. In this case, the indirect effects are larger than the direct effects, and more importantly they operate in the same direction. The direct effect of the water reform is to increase revenue by 3.7 percent and profit by 16.5 percent. The total effect is a 9.6 percent or 35.6 percent increase on revenue or profit, respectively.

Putting the trade and water reforms ‘together’, the particular farm modeled is still made worse off (35.6% - 40.3 %), but the water reform can almost totally compensate the farmer for the losses incurred by the trade reform. This result illuminates the importance of taking a broader view on reforms. It also suggests that the chronological order at which the reforms are implemented is important. Farmers will be more agreeable of a combined trade and water reform when they know that the water reform will compensate some or all of their losses due to the trade reform.

# **CONCLUSIONS**

The top-down (macro-to-micro) links considered in our analysis for Morocco are of a trade reform type. The bottom-up (micro-to-macro) links pertain to changes in farm water assignments and the possibility of water trading. For each policy we analyzed the direct, indirect and total effects. Water productivity is strongly influenced by these policies, with direct effects modified by general-equilibrium indirect effects and sometimes even reversed by them.

The impacts of the two reforms assessed are found to be different, with trade reform having an absolute impact of a higher magnitude than the water reform. Differences in relative and absolute magnitudes may differ, based on the institutional, economic, and physical conditions of the particular country analyzed.

The importance of packaging and sequencing reforms is an issue that deserves further research. Our analysis of the Moroccan economy reveals that this is an important factor affecting a successful implementation of any reform (See also Saleth and Dinar 2004, Chapter 10). The model developed here can be used to evaluate policy reforms in other situations, pending appropriate data, and is therefore of wide application. For example, various countries are in varying degrees of initial conditions and relative effectiveness of policy interventions. Applying the Micro-Macro approach to these countries will allow testing the hypotheses related to reform packaging and sequencing under different circumstances.

# **REFERENCES**

Berck, P., S. Robinson, and G. Goldman (1991). The Use of CGE Models to Assess Water Policies. In: Dinar, A. and D. Zilberman, (Eds.), The economics and Management of Water and Drainage in Agriculture.

Binswanger, H. P. (1989). "The Policy Response of Agriculture," Proceedings of the World Bank Annual Conference on Development Economics.

Diao, X. and T. Roe. (2000). “The Win-Win Effect of Joint Water Market and Trade Reform on Interest Groups in Irrigated Agriculture in Morocco,” in A. Dinar (ed.) The Political Economy of Water Pricing Reforms, Oxford University Press.

Diao, X., Roe, T., and Somwaru, A. (2002). Developing Country Interests in Agricultural Reforms Under the World Trade Organization. American Journal of Agricultural Economics, 19