Abstract
This chapter explains the partial and general equilibrium approaches of evaluating proposed changes in trade policies. It discusses some of the empirical methods available in trade policy research that have been presented in earlier chapters. Advance references and online links are given for detailed reading. This chapter is very important for those readers who have initiated and planned their research in the field of empirical analysis of international trade policy issues. It will guide them in choosing appropriate methodology and acquiring data for their research work.
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Notes
- 1.
Download using http://wits.worldbank.org/WITS/docs/wto_unctad12_e.pdf and read Chap. 4 for details.
- 2.
- 3.
- 4.
Download using http://wits.worldbank.org/WITS/docs/wto_unctad12_e.pdf and read Chap. 1 for details.
- 5.
- 6.
- 7.
- 8.
- 9.
The consumption of the composite and numeraire good (n) absorbs all income effects.
- 10.
dx k , j = dm k , j implies that changes in exports of good k by country j are equal to the imports of good k coming from country j.
- 11.
Import demand elasticity varies from importer to importer and proportionally affects the change in imports. Doubling this elasticity will double the change in imports.
- 12.
The substitution elasticity also varies by product and remains same for all the varieties of the considered product. It also implies that elasticity remains same irrespective of exporting partner. It also affects proportionally to the value of trade diversion but with a ceiling as explained in the previous section. The total diverted trade cannot be greater than the actual trade existed before the change in trade policy. One can use the original value of this elasticity parameter which is relevant to the concerned simulation.
- 13.
The value of export supply elasticity varies by product but remains same for all varieties of that product. It implies that elasticity remains same irrespective of exporting partner. WITS assumed infinite export supply elasticity by default with its representing value 99 with zero price effect. As per this model structure, maximum trade creation can be achieved with infinite export supply elasticity and total trade effect (creation effect + price effect) becomes lower with any other value of this elasticity parameter. It is recommended that one should take finitely elastic export supply function in case when the importing country is sufficiently large to influence the world prices by importing very large quantity after the reduction in tariff rates from the preference receiving country.
- 14.
Here the term region is used for the individual country or collection of countries in one region. The number of regions in any study may vary as per the study’s requirement. GTAP-9 database clubbed mostly all countries of the world into 140 regions.
- 15.
See Brockmeier (2001) for details.
- 16.
Endowment commodities include agricultural land, labor and capital.
- 17.
As per this assumption, products of the same industry, produced in different countries are distinct but substitute to each other. In GTAP model, elasticity of substitution between domestic and imported goods and elasticity of substitution among imports of different destinations are defined in the Armington aggregation structure for all agents in all the regions.
- 18.
The government consumption expenditure (E G ) system is governed by Cobb-Douglas utility function with constant expenditure shares over all goods; the private consumption expenditure (E P ) system is modeled by using CDE implicit expenditure function and is non-homothetic given by Hanoch (1975); and the third component of final demand system, i.e. savings (E S ) is a single commodity and fully exhausted by the investment demand.
- 19.
Read Burfisher (2011) for d etails on implementation of GTAP model.
- 20.
Researcher should be careful while selecting the variable for calculating the changes in imports and exports. The selection of wrong variable for interpretation can lead to misleading conclusions. Please see GTAP sets and variables for the correct definitions of all GTAP variables. The list is available on GTAP website at: https://www.gtap.agecon.purdue.edu/models/setsVariables.asp
- 21.
Set of non-saving commodities consist of endowment commodities, tradable commodities and capital goods.
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Arora, R., Singh, S., Mathur, S.K. (2017). Theoretical Exposition of Some Ex Ante Approaches to Assess the Proposed Trade Policy. In: Mathur, S., Arora, R., Singh, S. (eds) Theorizing International Trade. Palgrave Macmillan, Singapore. https://doi.org/10.1007/978-981-10-1759-9_8
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