Resource Center

Advanced Search
Technical Papers
Working Papers
Research Memoranda
GTAP-L Mailing List
CGE Books/Articles
Important References
Submit New Resource

GTAP Resources: Resource Display

GTAP Resource #2370

"Plant Heterogeneity and Applied General Equilibrium Models of Trade: Lessons from the Canada-US FTA"
by Rolleigh, Michael

Applied General Equilibrium models of trade failed to predict the sectoral changes in trade volumes following the Canada-US Free Trade Agreement. These models utilized a representative firm framework and used econometric estimates for the elasticities of substitution between home and foreign goods. I take a different approach on both
fronts, modeling plants as heterogeneous and calibrating the elasticities to match estimated markups in each sector. I introduce these
features by adapting a Hopenhayn (1992) model of plant entry and exit and embed this in a multisector trade model. The resulting model is very similar to Melitz (2003), but I focus on quantifying the effects of trade liberalization on trade flows and industrial structure. I calibrate the model using trade data between the United States and Canada before their Free Trade Agreement and evaluate the model's performance using later data. By successively shutting down various
features of the model, I isolate the contribution of each. I find that calibrating the elasticities to markups improves the fit between model
predictions and data significantly, from weighted correlations which are negative to values of 0.36. Incorporating plant heterogeneity and industrial data improves the weighted correlation to 0.77.

Resource Details (Export Citation) GTAP Keywords
Category: 2007 Conference Paper
Status: Published
By/In: Presented at the 10th Annual Conference on Global Economic Analysis, Purdue University, USA
Date: 2006
Created: Rolleigh, M. (4/14/2007)
Updated: Rolleigh, M. (4/14/2007)
Visits: 2,424
- Calibration and parameter estimation
- North America

If you have trouble accessing any of the attachments below due to disability, please contact the authors listed above.

Public Access
  File format 2007 Conference Paper  (212.3 KB)   Replicated: 0 time(s)

Restricted Access
No documents have been attached.

Special Instructions
No instructions have been specified.

Comments (0 posted)
You must log in before entering comments.

No comments have been posted.