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GTAP Resource #1773

"Improved Market Access for Russia or Own Liberalization as part of WTO Accession: what will raise Russian income and reduce poverty more?"
by Rutherford, Thomas, David G. Tarr and Oleksandr Shepotylo

Taking price changes from the GTAP model of world trade, we employ a small open economy computable general equilibrium comparative static model of the Russian economy to assess the impact of global free trade and a successful completion of the Doha Agenda on Russia and the poor in Russia. We compare those results with the impact of Russian accession to the World Trade Organization (WTO) on income distribution and the poor. Our model incorporates all 55,000 households from the Russian Household Budget Survey as “real” households in the model. Crucially, given the importance of FDI liberalization as part of Russian WTO accession, we also include foreign direct investment and Dixit-Stiglitz endogenous productivity effects from liberalization of import barriers against goods and foreign direct investment in services. We estimate that Russian WTO accession in the medium run will result in gains averaged over all Russian households equal to 7.3 percent of Russian consumption (with a standard deviation of 2.2 percent of consumption) with virtually all households gaining. If an inappropriately specified constant returns to scale model were employed the gains from WTO accession would be only about 1.2 percent of consumption with about 7 percent of households expected to lose, i.e., a model that ignored FDI liberalization and endogenous productivity effects from trade and FDI liberalization will likely get the sign wrong regarding the poverty impacts for many Russian households. We find that global free trade would result in a weighted average gain to households in Russia of 0.2 percent of consumption, with a standard deviation of 0.2 percent of consumption, while a successful completion of the Doha Development Agenda would result in a weighted average gain to households of –0.2 percent of consumption (with a standard deviation of 0.2 percent of consumption). Russia, as a net food importer, loses from subsidy elimination, and the gains to Russia from tariff cuts in other countries are too small to offset these losses. These results strongly support the view that Russia has by far the most to gain from its own liberalization, especially in business services, rather than from improvements in market access as a result of reforms in tariffs or subsidies in the rest of the world.

Resource Details (Export Citation) GTAP Keywords
Category: GTAP Application
2005 Conference Paper
Status: Published
By/In: Presented at the 8th Annual Conference on Global Economic Analysis, Lübeck, Germany
Date: 2005
Created: Tarr, D. (5/2/2005)
Updated: Batta, G. (6/21/2005)
Visits: 1,717
No keywords have been specified.

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