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GTAP Resources: Resource Display

GTAP Resource #2048

"Model comparison: different assumptions lead to different results"
by Decreux, Yvan

Trade liberalization is accepted by most economists as a good mean to increase welfare. However, some may benefit more than others and in some particular cases some countries may lose as a whole, particularly if they suffer terms of trade losses and/or diversion effects through preference erosion. Since the overall impact is not questionable though, it should be always possible for the countries benefiting the most of a trade agreement to compensate the losing ones. For this to be possible, there has to be a clear consensus about the impact of trade policy for each trade partners.

At present there may still remain some discrepancies between model conclusions. The availability of a common dataset to describe trade flows, production and tax policies, provided by the GTAP consortium, has helped to reduce the variability of assessments, but they still differ, sometimes widely. Some assumptions are suspected to matter significantly:

- Tariff dispersion is known to be welfare-worsening. Apparent dispersion is reduced during the aggregation process.
- Gains from trade liberalization come mostly from factor reallocation among sectors and regions. Factor mobility is therefore a key assumption in the model definition. The aggregation level is again important since factor mobility cannot be fully accounted for if factor move from a sector to itself.
- The overall factor supply may be endogenous. Its variation will also affect welfare, if the model can account for it.
- Imperfect competition may enhance some results in terms of welfare as well as trade impacts.
- The specific structure of demand in Mirage is certainly also relevant to look at.

The objective of this paper is to identify which of the above elements matter most. This study, run also with GTAP, LINKAGE and perhaps Goal, will be based first on a common framework regarding modeling assumptions as well as sector and region aggregation. All simulation will be based on the same liberalization scenario. Each team will then propose their variants using the possibilities offered by each model.

Resource Details (Export Citation) GTAP Keywords
Category: 2006 Conference Paper
Status: Published
By/In: Presented at the 9th Annual Conference on Global Economic Analysis, Addis Ababa, Ethiopia
Date: 2006
Created: Decreux, Y. (5/1/2006)
Updated: (5/1/2006)
Visits: 2,739
No keywords have been specified.

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